Managing Social Business Hybrids in Global Contexts

University of Massachusetts BostonScholarWorks at UMass Boston

Graduate Doctoral Dissertations Doctoral Dissertations and Masters Theses

5-31-2018

Managing Social Business Hybrids in GlobalContexts: The Case of Impact Sourcing ServiceProvidersChacko George KannothraUniversity of Massachusetts Boston

Follow this and additional works at: https://scholarworks.umb.edu/doctoral_dissertations

Part of the Business Administration, Management, and Operations Commons, and theEntrepreneurial and Small Business Operations Commons

This Open Access Dissertation is brought to you for free and open access by the Doctoral Dissertations and Masters Theses at ScholarWorks at UMassBoston. It has been accepted for inclusion in Graduate Doctoral Dissertations by an authorized administrator of ScholarWorks at UMass Boston. Formore information, please contact [email protected].

Recommended CitationKannothra, Chacko George, "Managing Social Business Hybrids in Global Contexts: The Case of Impact Sourcing Service Providers"(2018). Graduate Doctoral Dissertations. 404.https://scholarworks.umb.edu/doctoral_dissertations/404

https://scholarworks.umb.edu?utm_source=scholarworks.umb.edu%2Fdoctoral_dissertations%2F404&utm_medium=PDF&utm_campaign=PDFCoverPages

https://scholarworks.umb.edu/doctoral_dissertations?utm_source=scholarworks.umb.edu%2Fdoctoral_dissertations%2F404&utm_medium=PDF&utm_campaign=PDFCoverPages

https://scholarworks.umb.edu/diss_theses?utm_source=scholarworks.umb.edu%2Fdoctoral_dissertations%2F404&utm_medium=PDF&utm_campaign=PDFCoverPages

https://scholarworks.umb.edu/doctoral_dissertations?utm_source=scholarworks.umb.edu%2Fdoctoral_dissertations%2F404&utm_medium=PDF&utm_campaign=PDFCoverPages

http://network.bepress.com/hgg/discipline/623?utm_source=scholarworks.umb.edu%2Fdoctoral_dissertations%2F404&utm_medium=PDF&utm_campaign=PDFCoverPages

http://network.bepress.com/hgg/discipline/630?utm_source=scholarworks.umb.edu%2Fdoctoral_dissertations%2F404&utm_medium=PDF&utm_campaign=PDFCoverPages

https://scholarworks.umb.edu/doctoral_dissertations/404?utm_source=scholarworks.umb.edu%2Fdoctoral_dissertations%2F404&utm_medium=PDF&utm_campaign=PDFCoverPages

mailto:[email protected]

MANAGING SOCIAL BUSINESS HYBRIDS IN GLOBAL CONTEXTS: THE

CASE OF IMPACT SOURCING SERVICE PROVIDERS

A Dissertation Presented

by

CHACKO GEORGE KANNOTHRA

Submitted to the Office of Graduate Studies,

University of Massachusetts Boston,

in partial fulfillment of the requirements for the degree of

DOCTOR OF PHILOSOPHY

May 2018

Ph.D. in Business Administration



A Dissertation Presented

by

CHACKO GEORGE KANNOTHRA

Approved as to style and content by:

________________________________________________

Stephan Manning, Associate Professor

Chairperson of Committee

________________________________________________

Nardia Haigh, Associate Professor

Member

________________________________________________

Sumit K. Kundu, Professor

Florida International University

Member

_______________________________________

Nardia Haigh, Program Director

Ph.D. in Business Administration

_______________________________________

Alessia Contu, Chairperson

Department of Management

iv

ABSTRACT



May 2018

Chacko George Kannothra, B.Tech., University of Kerala

MBA, Indian Institute of Foreign Trade

Ph.D., University of Massachusetts Boston

Directed by Stephan Manning, Associate Professor

This dissertation consists of three related essays that seek to understand the

core contingencies and strategies of managing social-business hybrids (SBHs) in

global contexts. SBHs are also known as hybrid organizations that run commercial

operations with the goal of addressing a social (or environmental) problem. I focus on

the empirical case of Impact Sourcing Service Providers (ISSPs) which are SBHs that

operate in the global business services industry. These organizations hire and train

staff from disadvantaged communities to provide services to regional and

international business clients. The first essay contributes to the growing interest in

how hybrid organizations manage paradoxical social-business tensions. This study

identifies two major growth orientations - ‘community-focused’ and ‘client-focused’

growth - their inherent tensions and ways that hybrids manage them. The former

v

favors slow growth and manages tensions through highly-integrated client and

community relations; the latter promotes faster growth and manages client and

community relations separately. Both growth orientations address social-business

tensions in particular ways, but also create latent constraints that manifest when

entrepreneurial aspirations conflict with the current growth path. The second essay

examines the strategic potential of hybrid business models in the face of Africa’s

persistent difficulties with catching up in established markets. Focusing on the global

business services industry in Kenya and South Africa and the practice of impact

sourcing, this study argues that while regular providers struggle to compete with

global peers, hybrid model adopters manage to access underutilized labor pools

through community organizations, and target less competitive niche client markets. In

this context, critical industry, institutional and firm-level factors affecting hybrid

model adoption are identified further. The third essay investigates the variation in

business model configurations of SBHs as a function of the background and

aspirations of the social entrepreneur, and the level of domestic competition and

global client expectations. This study further introduces the concept of liability of

embeddedness, which relates to risks and costs facing hybrids targeting business

clients outside of the geographic context within which their social mission is highly

valued. This study contributes to research on international social ventures and

international business, in specifying antecedents and contingencies of targeting

international vs. domestic business clients as a social venture.

vi

ACKNOWLEDGEMENTS

It would not have been possible to complete this thesis without the support and

encouragement from a number of people. I would like to thank my supervisor

Associate Professor Stephan Manning for his valuable guidance, knowledge and

support throughout the entire duration of my doctoral studies. In addition, he was very

patient and kind both with his time and encouragement considering the circumstances

I found myself in. I would like to thank Associate Professor Nardia Haigh for her

theoretical discussions, valuable feedback and encouragement to complete my

dissertation within the given timeline. Professor Sumit K. Kundu has been a constant

source of encouragement and support and his valuable feedback has helped to develop

the contributions of this thesis further. My gratitude goes to the faculty at the

Department of Management, University of Massachusetts Boston, and particularly to

Chair of the Department Alessia Contu for her support, but also to Professor David

Levy, Associate Professors Maureen Scully, Benyamin B. Lichtenstein and Suhaib

Riaz for all the learning opportunity during the time I spent in doctoral program. I

would like to acknowledge the support, encouragement and friendship of Christopher

R Whynacht and Nichole Wissman-Weber, Ph.D. candidates at the College of

Management. It wouldn’t have been possible for me to complete my dissertation

without the constant support of my family and friends. I wish to acknowledge the care

and support of my mother who was by my side during my cancer treatment and

extended period of hospitalization. I wish to thank my brother in law who took his

time out to help me during my stay in the hospital and my father, sister, uncle and

other family members who supported me through out. My gratitude goes to the

vii

doctors and staff at the Beth Israel Deaconess Medical Center, Boston for their

kindness and care. Dr. Jessica Ann Zerillo, M.D., Carol Pilgrim, N.P., Dianne

Holland-Sullivan, R.N., Myrielle Whittle R.N., and Frank L. McCaffrey, LICSW,

Catherine Conahan, N.P. and other staff at Shapiro Center, BIDMC have been very

supportive and kind during the last two years. A special shout out to Dr. Mark P.

Callery and his team of surgeons and healthcare providers for getting me to this stage

of completing my thesis. My gratitude goes out to Yuriy Kotsur N.P. and other nurses

who took great care of me at BIDMC. I am thankful to everyone who helped me grow

intellectually and personally in the five and a half years I spent in doctoral program.

Chacko George Kannothra

viii

TABLE OF CONTENTS

ACKNOWLEDGMENTS ............................................................................. vi

LIST OF FIGURES ....................................................................................... ix

LIST OF TABLES ......................................................................................... x

CHAPTER Page

1. INTRODUCTION ......................................................................... 1

2. HOW HYBRIDS MANAGE GROWTH AND SOCIAL-BUSINESS

TENSIONS IN GLOBAL SUPPLY CHAINS: THE CASE OF IMPACT

SOURCING ....................................................................................... 36

3. HYBRID MODELS AS STRATEGIC OPPORTUNITY? THE GLOBAL

CHALLENGE OF BUSINESS SERVICE PROVIDERS IN AFRICA 89

4. HOW SOCIAL-BUSINESS HYBRIDS VARY IN INTERNATIONAL

CONTEXTS: FOUNDERS’ ASPIRATIONS, CLIENT EXPECTATIONS,

AND LIABILITY OF EMBEDDEDNESS ....................................... 150

5. CONCLUSION .............................................................................. 210

APPENDIX

APPENDIX A: IRB APPROVAL LETTER ..................................... 219

APPENDIX B: EXAMPLE INTERVIEW PROTOCOL .................. 221

BIOGRAPHICAL SKETCH OF THE AUTHOR ......................................... 230

ix

LIST OF FIGURES

Figure Page

1. Impact Sourcing Stakeholder Network .......................................... 15

2. Coding Tree ................................................................................... 51

3. Relationships of ISSPs within the Global Services Outsourcing Industry

............................................................................................................ 57

4. Hybrid Growth Orientations in Global Supply Chains .................. 73

5. Tripod factors affecting the feasibility of community-based hybrid models

............................................................................................................ 129

6. Two-stage model explaining emergence of four ISBH business model

configurations .................................................................................... 187

x

LIST OF TABLES

Table Page

1. Overview of data source .................................................................... 21

2. Summary of the 3 papers ................................................................... 27

3. Overview of data ................................................................................ 48

4. Summary of cases .............................................................................. 53

5. Comparison of Community-focused and Client-focused Growth Orientation

............................................................................................................ 62

6. Overview of case firms ...................................................................... 105

7. Comparison of Tripod Conditions of IS Models in Kenya vs. South Africa

............................................................................................................ 112

8. Overview of the dataset ..................................................................... 164

9. Summary of cases .............................................................................. 165

10. Dominant Business Model Configuration of ISBHs ......................... 173

1

CHAPTER 1

INTRODUCTION

Purpose of Thesis

This thesis investigates social business hybrids (SBHs) in an international

context. SBHs are typically defined as ‘organizations that run commercial operations

with the goal of addressing a societal problem, thus adopting a social or

environmental mission’ (Santos et al., 2015). SBHs have become increasingly

important organizational forms (Haigh et al., 2015; Battilana and Dorado, 2010).

They are sometimes referred to as ‘hybrid organizations’ or ‘social enterprises.' In

this study, I use these terms interchangeably. SBHs bridge traditional organizational

forms of commercial business and philanthropic charities corresponding to private

and non-profit sectors (Battilana and Lee, 2014; Battilana et al., 2012; Billis, 2010).

Previous studies have investigated hybrid organizations like Work Integration Social

Enterprises or WISEs (Pache and Santos, 2013), microfinance enterprises (Battilana

and Dorado, 2010), public-private partnerships (Jay, 2013), etc. The SBHs I

investigate for this study- impact sourcing service providers or ISSPs- employ and

train disadvantaged youths, people with disabilities, minorities, etc. (beneficiaries) in

business process outsourcing jobs. They serve both international and local firms

(business clients) as a part of their revenue generating business model. Such hybrid

2

organizations have been considered critical in promoting social innovation while also

pursuing viable and durable business models.

SBHs combine multiple institutional logics- the business logic of revenue and

profit generation by providing commercial goods or services, and the logic of societal

welfare by offering services that positively affect social and ecological systems

(Smith et al. 2013). Social business hybrids integrate social missions into a feasible

business model (Jay 2013; Porter and Kramer 2011; Haigh and Hoffman, 2014;

Yunus et al., 2010). This social business model can be viewed ideally as a constrained

optimization model (Weerawardena and Sullivan Mort, 2006), where profit has to be

optimized to meet the social mission of the organization. Balancing dual missions

may translate into challenges, as social and commercial concerns compete for

resources in growth efforts (Pache and Santos 2013; Jay 2013). While many

organizations face conflicting stakeholder and institutional demands (e.g., Pache and

Santos 2010), it is pronounced among hybrids due to their plural goals (Battilana and

Lee 2014; Smith et al. 2013).

Prior research has pointed out that hybrids face a fundamental tension between

business and social logics which may over time constrain their operation (Andre and

Pache, 2016), and lead to ‘mission drift’ (Battilana et al., 2012; Ebrahim et al. 2014).

While various organizational approaches to addressing this tension have been

discussed in general (Greenwood et al., 2011), I seek to add nuance to this

conversation by shifting emphasis to hybrid organizations and related challenges in

increasingly important global contexts. That is, whereas prior research has

predominantly studied hybrids in local (e.g., Cambridge Energy Alliance by Jay,

2013) or national contexts (e.g., French Work Integration Social Enterprises by Pache

3

and Santos, 2013), I seek to understand core contingencies of managing hybrid

organizations in global contexts – specifically in the context of global business-to-

business relations. In particular, I am interested in how hybrid organizations balance

demands and expectations from global business clients with needs of often locally

embedded communities. Thus, the research question guiding the thesis is: What are

core strategies and contingencies of managing social-business hybrids in global

contexts?

Empirical Motivation for the Research

The empirical context of my research is global outsourcing in general and the

so-called trend of ‘impact sourcing' in particular. The global outsourcing industry is

arguably one of the fastest growing sectors worldwide, specifically around the IT-

enabled outsourcing of IT and business processes (Manning et al., 2008). Clients in

particular from developed countries increasingly outsource business processes to

specialized, typically lower-cost vendors operating mostly out of developing countries

(Farrell, 2005). Whereas for a long time, the outsourcing industry has been a

primarily business-driven sector, more recently some service providers have adopted

so-called ‘impact sourcing' business models. Impact Sourcing (IS) refers to the

training and hiring of people from disadvantaged and marginalized groups, e.g.,

physically handicapped, minorities, or people from remote or impoverished areas, for

outsourcing related jobs (Rockefeller Foundation, 2013; Bulloch and Long, 2012). In

this context, so-called impact sourcing service providers (ISSPs) operate as hybrid

organizations marketing their services to global and domestic clients, while aiming to

make a social impact in the local communities by providing inclusive training and

employment opportunities. The particular case of ISSPs, on the one hand, allows us to

4

illustrate and study operational challenges of hybrid organizations in global contexts.

On the other hand, it adds nuance to prior discussions on the role of growth

aspirations, client relations and entrepreneurial networks in affecting the adoption of

social hybrid business models, management of tensions, and how these social

business models vary depending on structural conditions. Data for this study includes

a series of interviews and secondary data collected in different field contexts,

including the U.S., India, Kenya and South Africa.

The remainder of this introductory chapter is organized into three parts. First,

to place the thesis into a broader context, the theoretical perspective applied in this

thesis is presented. Second, the research design including the empirical foundation is

presented, and finally, the specific motivation and core findings of the three research

papers are introduced.

Contextualizing the Thesis

Hybrid Organizations: Constitution and Challenges

Extant research has made significant contributions to understanding how

hybrid organizations navigate paradoxical tensions when they combine multiple

organizational forms, institutional logics, etc. More importantly, prior research has

looked into the activities, structures, and processes that constitute the key areas of

organizational life of hybrid organizations. This thesis seeks particularly to draw and

build on the research on hybrid organizations.

Hybrid organizations are often defined as organizations that combine

(multiple) established organizational forms (Haveman and Rao, 2006, Hoffman et al.

2010, Pache and Santos, 2013). Organizational forms consist of clusters of features

common to organizations that enact that form (Hannan and Freeman, 1986;

5

Romanelli, 1991). Other organizational scholars have defined hybrid organizations as

combining multiple institutional logics (Greenwood et al, 2011; Battilana and Dorado,

2010), where institutional logics are defined as taken for granted beliefs and practices

that guide actors’ behaviors in their fields of activity (Friedland and Alford, 1991;

Thornton and Ocasio, 1999). Hybrids have thus been described as organizations

combining multiple organizational identities, organizational forms or institutional

logics depending on the unit of analysis (Battilana and Lee, 2014). These different

conceptions often are interrelated. While logics are constituted at an institutional

level, they give the cultural materials through which organizational forms are

constructed and reproduced (Greenwood and Hinings, 1993).

Specifically, prior research has focused on hybrid enterprises that combine

business endeavors with social missions (Haigh et al., 2015). In other words, many

organizations that are associated with hybrids follow and particularly combine two

specific logics of action: the market logic of revenue generation (this may also include

profit-making, professional services, etc.) and the logic of social welfare (this may

include targeted social and ecological impact). In so far, hybrid organizations

resemble what many would call ‘social enterprises' or ‘social business hybrids.' Some

scholars even regard social enterprises as a particular type of hybrid organization

(Battilana and Lee, 2014). I will focus on this type of hybrid organizations.

Hybrid organizations have gained popularity as both the state and conventional firm-

level approaches have been facing limitations in addressing pressing social problems,

such as labor conditions, environmental protection, and social inclusion. As for the

role of the state, budget cuts, lack of legitimacy and lack of resources and

coordination capacity have limited the ability of state agencies and the public sector to

6

adequately address social problems in recent years (Matten and Crane, 2005; Scherer

and Palazzo, 2007). The limited role of the state has been an issue in particular in

liberal market economies which rely a lot on market-based coordination for education,

healthcare, and other domains (Soskice and Hall, 2001); but the role of the state has

also been challenged or limited for other reasons (e.g., lack of political stability) in

other economies, not least in the developing world. Relatedly, on a transnational level,

governments and inter-governmental regimes have been severely limited in protecting

human rights, protecting the environment, etc. (Haas, 2004).

This has given rise to new models of governance of social issues involving

corporations and entrepreneurial efforts (see also Khanna and Palepu, 2000; Scherer

and Palazzo, 2007). Corporations have been involved in multiple ways, including

cross-sector partnership projects (Vurro, Dacin, and Perrini, 2010; Selsky and Parker,

2005), voluntary standard-setting ( Reinecke, Manning, and Von Hagen, 2012 ) and

corporate social responsibility (CSR) processes (Matten and Crane, 2005). As for the

latter, prior research has focused in particular on corporate initiatives, in response to

pressure from activists and stakeholders, to incorporate ethical and philanthropic

activities in addition to regular business conduct (Carroll, 1999; Doh and Guay,

2006). However, more recent studies suggest that CSR programs often take the risk of

becoming ‘add-on’ activities (Porter and Kramer, 2011), and that CSR has been

incorporated into a business logic of action where there is a considerable gap between

stated intentions and actual implementation (Utting, 2007; Sood and Arora, 2006 ).

For example, while the working conditions of the core workforces of many companies

have improved since they embraced CSR, the circumstances under which the

employees of their sub-contractors work have not changed much (Utting, 2007).

7

In the face of limitations of both state-governed and private initiatives in tackling

social and environmental problems, some scholars have shifted attention to a ‘third'

approach: new organizational forms, including ‘social enterprises' and ‘hybrid

organizations', that blur the traditional profit/non-profit divide by adopting

commercially viable business models aimed at positive social and environmental

impact (Haigh and Hoffman, 2012; Haigh et al., 2015; Porter and Kramer, 2011).

Examples include combinations of business and charity forms (Pache and Santos,

2013), microfinance organizations combining banking and development forms

(Battilana et al., 2012), and work integration social enterprises (WISE) (Battilana et

al., 2015).

More specifically, hybrid organizations have been argued to possess

distinctive advantages compared to regular business enterprises in their ability to

address social issues (see, e.g., Haigh and Hoffman, 2014). First, they can address

sustainability issues at the firm and industry level through choosing their growth

orientation, a different set of performance indicators, internalized priority to social

and ecological impact, etc. when compared to mainstream firms (Haigh and Hoffman,

2014). Second, hybrids that started with a social mission can ensure sustainability of

their mission through adopting a business model to generate revenue. The prior

experience or familiarity of the organizational members with for-profit logics

(environmental imprinting) may aid in this process (Jay, 2013). Third, hybrids that

were formed due to changing economic conditions – e.g. reduced public funding of

non-profits, adoption of new legal forms of organizing, public intervention to

promote inclusive labor markets through Work Integration Social Enterprises (Pache

and Santos, 2010, Defourny and Nyssens, 2008), public-private alliances (Jay, 2013)

8

etc. – can better access public sources of funding while maintaining market based

operations to generate revenue.

Those advantages are also reflected in the various motivations of and

facilitating conditions for entrepreneurs behind starting hybrid organizations. Prior

research suggests that environmental imprints of the entrepreneurs –especially

previous work experience in a commercial environment, functions as an antecedent to

the creation of new hybrid forms (Lee and Battilana, 2013). Professional education of

the entrepreneurs and the indirect influence of their parents’ work experience has also

been found to have influenced the creation of hybrid organizational forms.

In spite of various motivations and potential advantages of starting a hybrid

organization, prior research also indicates that hybrid organizations face permanent

tensions, arising in particular from the potentially competing social welfare and

commercial logics of action (Pache and Santos, 2013; Jay, 2013). Notably, many

organizations face conflicting demands from multiple stakeholders and institutional

environments (Pache and Santos, 2010; Smith and Tushman, 2005); however, this is

particularly pronounced in the context of hybrid organizations (Battilana and Lee,

2014). Besides, hybrid organizations are "multiple things to multiple people" which

comes with an additional set of challenges (Kraatz and Block, 2008).

More specifically, prior studies suggest that hybrid organizations experience

tensions at multiple levels and in multiple forms. First, hybrids experience various

internal tensions (Pache and Santos, 2010), including different individual and

organizational identities leading to interpersonal conflicts (Glynn, 2000). Hiring from

different sectors may reinforce such conflicts (Battilana et al., 2012). Second, hybrids

may be confronted with paradoxes of performance as viewed through the lens of

9

dominant institutional logics (Jay, 2013). The outcomes of such hybrid organizations

appear as both successes and failures when viewed from a client service or public

service perspective. These paradoxes need to be recognized by the organizational

members under multiple definitions of success- an interpretative process in which

people often invent new ways to frame their organization (Jay, 2013). Third, members

may face power struggles due to dominant institutional logic resulting in one logic

overshadowing the other (Thornton and Ocasio, 1999).

Also, one major challenge facing hybrid organizations is so-called ‘mission

drift.' When entrepreneurs depend on a commercial logic to support their social

mission, there often arises a situation described by Battilana et al. (2012) as a "focus

on profits to the detriment of the social good." When products and services of hybrid

organizations are valuable to both customers and beneficiaries, hybrid organizations

may seek profit-making over social mission by targeting wealthier and more

profitable market segments. Mission drift may also occur when organizations grow

and the influence of the entrepreneur (whose dedication and passion may have

resulted in the founding of the organization) over the new staff decreases (Battilana et

al., 2012).

In the face of these various tensions, prior literature has investigated various

organizational and operational practices of managing tensions. Prior research has

emphasized for example different ways in which hybrid organizations selectively

combine, balance or decouple practices and structures to meet competing demands

(see also Battilana and Lee, 2014; Pache and Santos, 2013). Some studies argue that

maintaining hybrid models may require “decoupling” in terms of internalizing some

and symbolically adopting other practices to demonstrate external legitimacy (Aurini,

10

2006). Some hybrid organizations may be able to strike a balance by selectively

combining practices from both logics (Pache and Santos, 2013), or by developing

entirely new practices (Battilana and Dorado, 2010).

Hybrid Organizations in Global Context

My dissertation is designed to contribute to the important conversation on

contingencies and challenges of hybrid organizations. More than previous research, I

seek to shift emphasis to a largely neglected, yet increasingly important context for

hybrid organizations: the global economic and institutional environment.

Interestingly, most research on hybrid organizations has been focused on specific

local or national settings. For example, Cambridge Energy Alliance studied by Jay

(2013) combines the logics of public service and client service in a local context.

Similar studies of hybrid organizations include the Work Integration Social

Enterprises of France (Pache and Santos (2013), and Bolivian microfinance

organizations (Battilana and Dorado, 2010; Battilana et al., 2012), etc. where the

hybrid organizations are limited to a national setting.

With increasing economic exchanges, interdependencies and integration

across national borders (Giddens, 2013; Ghemawat, 2011), more and more hybrid

organizations operate across geographic boundaries as well. For example, the eye

glasses company Warby Parker based out of New York City donates one pair of eye

glasses in developing countries (through its partner organization Vision Spring) for

every pair it sells (Marquis and Park, 2014). Warby Parker’s commercial operation

takes place in US cities while its social mission is based in developing countries.

Another example is the case of the Belgian organization Mobile School (Battilana et

al., 2012) that provides educational materials to children who live on the streets all

11

over the world. Mobile School engages in consulting and corporate training programs

to generate revenues. My empirical focus, as I elaborate further below, are hybrid

organizations in the global outsourcing industry.

Focusing on hybrid organizations in global contexts allows, on the one hand, to

add nuance to established streams of research on hybrid organizations. Specifically, a

global perspective draws further attention to a critical issue that hybrids encounter: the

challenge of reconciling growth aspirations with maintaining social missions. Prior

research suggests that as hybrid organizations scale up operations, they may be

subject to “mission drift” (Ebrahim et al., 2014) and eventually lose their identity as a

“social enterprise” (Andre and Pache, 2014). The challenge of growth seems

particularly important as hybrid organizations expand beyond national borders or seek

to acquire global clients. As hybrid organizations grow across borders, both the way

and the extent to which they implement and integrate social and business aspects of

organizing is likely to change (see in general Battilana and Lee, 2014). I seek to

investigate this further.

Empirical Foundation of the Thesis

Impact Sourcing: Hybrid Business Models in Global Outsourcing

The empirical context of this dissertation is global outsourcing – one of the

fastest growing sectors in today's economy. In particular, I focus on global

outsourcing of IT and business processes, including IT infrastructure, payroll, tech

support, call centers, software testing, and engineering support. Such services are

increasingly being outsourced to specialized service providers who typically operate

outside the home country of clients (Manning et al., 2008). Within this context, so-

called impact sourcing service providers (ISSPs) have emerged who specialize in

12

hiring and training staff from disadvantaged groups in society for outsourcing jobs – a

practice called impact sourcing (IS).

To better understand this relatively new practice I introduce drivers and effects

of global outsourcing in general briefly. Global outsourcing has been facilitated by

increasing digitalization and commoditization of business processes (Davenport,

2005). It is mainly driven by cost, speed, access to talent and other strategic

advantages (Manning et al., 2008; Lewin et al, 2009) which have led Western client

firms, from the U.S. and Western Europe in particular, to increasingly outsource

business processes to specialized service providers abroad (Ethiraj, et al 2005,

Athreye, 2005; Dossani and Kenney, 2007). Providers include both large full-service

providers, e.g., Accenture, IBM Business Services, Infosys, Genpact, and Wipro, and

smaller, more specialized vendors. Many providers are headquartered or at least

operate from developing regions, e.g., India, China, and Eastern Europe.

Developing countries, not least the outsourcing pioneer economy India, have soon

realized potential benefits of the outsourcing industry for local economic development

and growth (Bresnahan et al., 2001; Reddy, 1997; Patibandla and Petersen, 2002). For

example, local industrial policies have targeted funding to establish a suitable IT

infrastructure and highly trained workforce to attract outsourcing projects and to

eventually provide new employment and career opportunities, in particular for young

scientists and engineers (Freeman, 2006). With a similar mindset, other regions, e.g.,

Africa and Latin America, have tried to follow the Indian example and develop an

outsourcing industry as a way to promote economic development (Manning, 2013).

However, these efforts have typically focused on a certain segment of urban, highly

trained professionals (Freeman, 2006), while neglecting less privileged groups (e.g.,

13

rural, unskilled, disadvantaged) of the population. From the perspective of businesses,

it has been observed, even for a highly advanced outsourcing market like India, that

firms located outside urban IT hubs lack the formal and institutional networking

opportunities available to those located within these hubs (Nanda and Khanna, 2007).

Therefore, it can be concluded that with many countries and regions (especially,

African countries) being bypassed from the new wave of IT offshoring, the benefits

accrued from it have been limited (Levy, 2005). Even for an IT hub like Bangalore,

low wages, underemployment, higher prices, and reduced governmental services

(Waldman, 2004) are still persistent.

To promote more inclusive development, a number of development initiatives,

in particular, the Impact Investing Initiative of the Rockefeller Foundation, have

focused efforts to establish a new practice called ‘Impact Sourcing' (IS). Following

pilot projects in Kenya, Ghana, South Africa and Nigeria, the IS Conference formally

introduced IS in 2011 as a new model of global service outsourcing that focuses on

providing employment opportunities to disadvantaged groups in society. According to

the International Labor Organization (2011), "disadvantaged refers not just to

economic factors, such as income poverty, or lack of experience in and poor

understanding of the formal job market, but also social factors such as gender, racial,

ethnic or migrant background, and geographical isolation with poor access to quality

education and job opportunities." In practice, this includes people with limited access

to education and income, which prevents them from access to decent livelihoods and

employment opportunities. It also includes people with physical disabilities, e.g.,

impaired hearing, whose access to regular jobs and careers is severely constrained.

14

Providers that adopt IS models – so-called Impact Sourcing Service Providers (ISSPs)

– are examples of hybrid organizations as they aim at offering profitable, high-quality

services at competitive prices to global clients while at the same time making a

developmental impact in the local community. One example is iMerit – an ISSP

operating in a poor rural community in India. iMerit recruits youth through a non-

profit local community organization which iMerit helped establish several years ago.

Hires get trained by both iMerit and their partner organization to take on various tasks

– from data management to digital publishing and service desk jobs – for various

global clients. Another example is Cayuse Technologies, a U.S.-based sub-contractor

of Accenture that operates in a Native American reservation. Focusing on business

processing and IT-related jobs, Cayuse Technologies hires and trains Native

Americans, whose employment prospects are limited to local casinos or temporary

jobs, if any jobs are available at all.

ISSPs typically operate within a complex network of stakeholders with

partially conflicting demands. Figure 1 displays a generalized IS stakeholder network.

Next, I introduce in particular four stakeholders: global clients, employees,

community organizations, and foundations.

Global clients. Global clients include private sector firms, telecommunication

providers, government organizations, large NGOs, universities, charitable

organizations and in some cases large business process outsourcing firms. In general,

clients are concerned about cost savings, but also high service quality, data security

and reliability (Bulloch and Long, 2012). While the rather new practice of IS has been

mainly driven by providers rather than clients, the latter show an increasing interest in

IS, in particular when IS leads to cost reduction further, as indicated by recent studies.

15

Also, according to a recent survey by International Association of Outsourcing

Professionals (IAOP, 2012), more and more large clients consider corporate social

responsibility (CSR) as part of their outsourcing decisions, which may facilitate

further adoption of IS. However, as of today, clients select providers – no matter if

mainstream or ISSPs – mainly based on their ability to cut costs and provide high-

quality services in a reliable fashion.

Figure 1 Impact Sourcing Stakeholder Network

Employees and their communities. Other important stakeholders are the actual

employees and their communities. ISSP employees are typically challenged by poor

access to sustainable sources of livelihood, and lack of formal education. For most

ISSP staff, this is their first job in a "professional" environment. In addition to

learning technical skills required for the job, they also learn soft skills like working in

a team, negotiation, networking, etc. which may help them in their professional

careers. Some ISSPs allow their employees to pursue a college degree simultaneously

with the work that they do, thereby ensuring better future employability. Also, many

16

ISSPs encourage their employees to participate in community development programs

actively. Along with the employees, the local communities also benefit from IS with

more community members getting employed, as well as improved education and

infrastructure facilities.

Local community organizations. One crucial stakeholder is local, often non-profit

community organizations that serve as subcontractors or ‘channel partners.' They play

a major role in recruiting, and training (Information Technology skill development) of

employees and therefore need extensive knowledge about the local population. Their

primary mandate is to serve and represent the interests of the local community in

general, and the interests of particular target groups, such as disadvantaged youth, in

particular. ISSPs may also partner up with various other supporting organizations,

such as local universities and training institutes. Community organizations are often

supported by industry associations and state IT boards which formulate ICT

(Information Communication and Technology) friendly policies to support

employment and industry development.

Foundations. Apart from operational partners, various funding organizations may be

involved. For example, the Rockefeller Foundation played a significant role not only

in conceptualizing and popularizing IS through its Poverty Reduction through

Information and Digital Employment (PRIDE) initiative, and in disseminating IS

practices but also in funding feasibility studies and IS adopters. Also, philanthropic

organizations and consulting firms may serve as funding institution, e.g., by providing

training grants.

17

Comparison of ISSPs to Work Integration Social Enterprises

Organizations similar to ISSPs have been studied in the context of hybrid

organizations previously. For example, Pache and Santos (2013, 2010) analyzed how

hybrid organizations incorporate elements of competing logics and navigate the

paradoxical outcomes that they usually encounter through comparative case studies of

Work Integration Social Enterprises (WISE). These organizations developed in the

late 1970s with the specific mandate to hire and train long-term unemployed

individuals in fields as varied as construction, catering, or temp work. They were

conceived as economic entities with a primary focus on the social mission. Revenues

of WISEs came from the sales of products and services that the employees generated

as well as public subsidies as long as they maintain their social mission.

Similarly, most ISSP entrepreneurs consider themselves commercial entities and

professional organizations with a mandate to make a social impact on local

communities. At a broader level, the drivers of social impact varied from knowledge

of the local conditions, altruistic intentions and even knowledge of funding sources

for social enterprises. Much like hybrid organizations where commercial imprints

acquired by its founders from previous work experiences function as antecedents to

the creation of hybrids (Lee and Battilana, 2013), preliminary empirical evidence

points out that the ISSP founders' past work experiences have influenced the

establishment of these organizations. Thus, ISSPs rely on market-based principles to

serve their social mission, and hence these organizations are hybrids that incorporate

competing social welfare and commercial logics.

18

Organization of the Thesis

This thesis consists of three distinct research papers that each investigates

particular research questions relating to the core contingencies of managing hybrid

organizations in global contexts. Each paper is written to be self-contained and can be

read separately. In the following section, the research design and data collection of the

thesis are elaborated on before the individual research papers are introduced and

summarized.

Research Design and Data Collection

Research Design

To better understand contingencies and challenges of managing ISSPs as

examples of hybrid organizations operating in global contexts I employ primarily

qualitative methods. The emergent nature of qualitative research aids the researcher’s

growing knowledge about the project (Rallis and Rossman, 1998), especially when a

new phenomenon like Impact Sourcing is explored with theorizing in mind. The

iterative and interpretive nature of conducting qualitative research (Rallis and

Rossman, 1998) further helps in navigating the differing logics present in hybrid

organizations and understanding and representing the motivations and actions of the

individuals and organizations present in the field.

The case study method is particularly useful in examining contemporary

processes in which the investigator has little or no control over the associated

behavioral events (Yin, 2008:18). Also, this method is preferred over others because it

has a more explanatory orientation for situations in which the phenomenon is closely

embedded to the context (Yin, 2008). Impact Sourcing is situated in the context of

long-established outsourcing and offshoring services operations and is intended to

19

benefit a new set of beneficiaries-disadvantaged groups in the society. The growing

interest of local and global entrepreneurs, global clients, impact investors and

philanthropic foundations each adds a different dimension to the multifaceted context

in which Impact Sourcing is situated.

Specifically, a multiple case study design approach (Yin, 2008) is employed

to analyze the challenges and contingencies of hybrid organizations in a global

context. This allows to elaborate and add nuance to theoretical implications of

findings beyond one particular case, aiming for a ‘generalization in small steps’

(Diesing, 1971). Specifically, I apply what Yin (2008) calls a ‘replication logic.' I

thereby combine literal and theoretical replication. Literal replication, according to

Yin (2008), means that the case analysis is replicated for similar cases to increase the

robustness of findings. For example, I selected multiple ISSP cases in the same

economic and institutional context, as well as with other similar critical features (see

further below). Theoretical replication aims to expand the variety of cases along

relevant criteria. In particular, as elaborated below, cases where also selected across

different economic contexts, as well as across different founding conditions, sizes,

and orientations. This allows differentiating findings along theoretically useful criteria

(Eisenhardt, 1989; Eisenhardt and Graebner, 2007).

Specifically, I studied ISSPs in the U.S., India, Kenya and South Africa. These

contexts are both similar and different along important dimensions which I elaborate

further below. Second, I selected ISSP cases from a population of providers both

within and across these country contexts, to allow for variety along a number of

dimensions, in particular, their distance and governance relation with clients, size,

entrepreneurial background, etc. I elaborate on these criteria further below. Such an

20

embedded case study research design adds operational detail to the cases thereby

enhancing the insights derived and allowed for multi-level explanations (Yin,

2008:50).

Data collection: Interviews and archival data

Multiple sources of empirical evidence were utilized to explore and support

research findings (Yin, 2008; Eisenhardt, 1989). The most important sources were

interviews and secondary archival data. As part of each field study, multiple

interviews were conducted with ISSP entrepreneurs, incubators, policy-makers,

training institutions and others. These were in-depth interviews where respondents

were asked about the facts of a matter as well as their opinions about the events (Yin,

2008:107). The interviews were conducted in multiple rounds- initially, after a review

of archival data and research reports available. Policymakers, industry association

executives, foundation executives, etc. were interviewed to obtain useful information

about developments in the field. This group of interviewees became the key

informants and helped to identify some of the potential interviewees in the second

round of the interview process. That is, to identify valuable interview partners in all

four empirical contexts, I followed a snowball approach by first consulting major

foundations/business associations (Rockefeller Foundation, NASSCOM, BPeSA), and

by screening prior literature on ISSPs (Rockefeller Foundation, 2011, 2013).

Table 1 gives an overview of all interviews conducted (n=38). In Kenya,

overall, thirteen semi-structured interviews were conducted with ISSPs, incubators,

and policy-makers in Kenya. In the U.S., four have been conducted with ISSPs as

well as members of the Rockefeller Foundation. In India, nine interviews have been

conducted with ISSPs and local organizations (two interviews were conducted with

21

executives of the same organization). In South Africa, 13 interviews have been

conducted with regular Business Process Outsourcing (BPO) and IS service providers,

as well as with representatives of the government, especially an outsourcing

promotion agency, local representatives of Rockefeller Foundation and the Maharishi

Institute – training institution associated with a regional university.

Table 1 Overview of data source

Source Number

Primary Data: semi-structured interview

Kenya

ISSP CEOs and managers 4

Regular CEOs and managers 5

Policy Makers 2

Experts 2

South Africa



Policy Makers 4

Experts 2

US


Regular CEOs and managers -

Policy Makers 2

Experts -

India



Policy Makers 1

Experts -

Total number of interviews 38

Secondary Data:

Rockefeller Foundation (reports, articles,

cases)

30

ISSP Websites 12

Accenture Development Partnership

(report)

2

Avasant Consultants (report) 1

Digital Divide Data Impact Report 1

World Bank ICT Unit (report)

IEEE Readynotes: Rural Sourcing & Impact

Sourcing

1

1

Total number of secondary sources 48

22

In the interview process, we addressed issues of reliability and validity (Yin,

2008: 40). As for reliability in the data collection process, we used a standard

procedure to increase reliability independent of interviewers. To increase external

validity, a replication logic was applied as described earlier through multiple rounds

of data collection. As for construct validity, emerging constructs were partly validated

by confronting selected interviewers in the consecutive data collection with emerging

findings. The constructs were defined in dialogue with concepts from the literature

review. Also, the operational measures to capture these constructs were related to

relevant literature (Yin, 2008:42).

To further increase the external validity of our findings, we have been

collecting secondary data on ISSPs across the world, e.g., policy reports and

practitioner articles, with focus on the business model of ISSPs and the

implementation challenges. For example, the case of Samasource, a well-known ISSP,

has been used in our analysis as a reference point (based on prior studies of this

organization) to put our findings in perspective. Also, we keep track of self-reports of

Rockefeller Foundation to capture ongoing trends related to Impact Sourcing as a

business practice. Furthermore, we incorporate findings from consulting groups, such

as Accenture, to complement our findings.

Motivation and Core Findings of the Research Papers

The three papers try to address the overarching research question: “what are

the core strategies and contingencies of managing social-business hybrids in global

contexts?”– specifically in the context of global business-to-business relations. The

first paper seeks to better understand how hybrids operating in global markets manage

paradoxical social-business tensions in the context of growth. The second paper

23

identifies key industry, institutional and firm-level factors that affect hybrid model

adoption. This paper illustrates the business potential of hybrid enterprises in

latecomer economies like Sub-Saharan Africa and emphasizes the role of local

community resources (e.g., labor, market ideas), community organizations giving

access to such resources, and business-community alliances. The third paper

investigates the variation in business model configurations of social business hybrids

as a function of the background and aspirations of the social entrepreneur, and level of

domestic competition and global client expectations. The three papers are summarized

in Table 1.2 and are elaborated below.

Chapter 2: How Hybrids Manage Growth and Social-Business Tensions in

Global Supply Chains: The Case of Impact Sourcing (co-authored with Stephan

Manning and Nardia Haigh).

There has been growing interest in paradoxes, or ‘‘contradictory yet

interrelated elements that exist simultaneously and persist over time’’ (Smith and

Lewis 2011)—elements that seem logical in isolation, but irrational when viewed

simultaneously (Lewis 2000; Schad et al. 2016; Hahn et al., 2015). Hybrid

organizations (or hybrids) are increasingly important organizational forms that

embrace a central paradox: the simultaneous pursuit of social missions and financial

objectives (Battilana and Lee, 2014). This paper examines examine how hybrids

approach growth (their ‘‘growth orientations’’) while managing paradoxical social–

business objectives. The guiding research question is: “How do hybrids in global

supply chains balance growth opportunities and social–business tensions?”

Based on an inductive multi-case study of twelve ISSPs from around the world, I

differentiate two major orientations toward growing and managing social–business

24

tensions: ‘‘community focused’’ and ‘‘client-focused’’ growth. Community-focused

growth denotes an approach orchestrating slower growth within the constraints of

integrated community and client relationships. ISSPs with this orientation often

operate from rural areas and serve co-located or domestic clients that share the social

context and support the social mission. Social–business tensions are managed by

developing community-centered solutions, e.g., aligning client expectations with

workforce capacity through training and sensitizing them about the community. In

contrast, client-focused growth seeks faster growth driven by pressure and aspirations

to expand while managing social missions independently. ISSPs with this orientation

often cater to international clients from more developed, mostly urban areas, and

tensions are managed through client-centered solutions, e.g., certifying the workforce

to independent third-party standards. Importantly, entrepreneurial aspirations can be

both a driver of growth orientations and a source of conflict. Conflicts may lead

entrepreneurs to move from one growth orientation to another and therefore manage

social–business tensions in new ways.

Chapter 3: The strategic potential of community-based hybrid models: The case

of global business services in Africa (co-authored with Stephan Manning and

Nichole K. Wissman- Weber).

While organizational scholars have considered some of the reasons behind the

origins of social business hybrids, especially entrepreneurs’ antecedents like cognitive

characteristics, the role of imprinting from past work experience etc. (Mair and

Noboa, 2006; Robinson, 2006; Lee and Battilana, 2013), very few studies have looked

at the industry conditions that favor the adoption of social business hybrid models.

This paper adds to the debate on hybrid organizations by providing a more context-

25

sensitive understanding of their adoption- certain industry conditions may allow

smaller scale hybrids to emerge and put less focus on the need to scale up. This

research is pertinent for late comer economies like sub-Saharan Africa where the

ability of regular business models to ‘catch-up' (Altenburg et al., 2008; Lorenzen and

Mudambi, 2013) with global competition have been considered difficult (The Africa

Report, 2012). This study investigates the research question- “under what conditions

is the adoption of hybrid models a feasible strategic opportunity for firms that operate

in Sub-Saharan Africa and serve regional and global clients? “

Using an extended version of tripod model of multilevel strategic analyses

(Peng et al., 2008,2009), I analyze the interplay of institutional, industry and firm-

level conditions in promoting certain strategic directions within firm populations. This

study finds that community based hybrid business models can leverage community

resources- like underutilized labor markets, local community organizations, and

business ties with these organizations- to their advantage when compared to regular

business models. I also find that this requires both institutional and firm level support

to using community resources and serving niche markets rather than mainstream

markets. This paper positions community based hybrid business models as an

underutilized potential that may help in the catch-up process of sub-Saharan African

countries.

Chapter 4: How Social Business Hybrids Vary in International Contexts:

Founders’ Aspirations, Client Expectations, and Liability of Embeddedness (co-

authored with Stephan Manning, Nardia Haigh and Sumit K. Kundu).

Social business hybrids are complex business models (Smith et al., 2010) and

the globalizing nature of these social businesses has added to this complexity and

26

variability of these business models. Prior research has recognized that SBHs vary in

their implementation (e.g. Battilana and Lee, 2014; Jay, 2013; Pache and Santos,

2013)- for example, core activities, workforce composition, organizational design etc.

vary to different extent (integrated or differentiated) in the way they pursue social and

commercial goals. It is important to consider the broader institutional context,

competitors, customers, consumers, suppliers and other partners to understand this

variation, especially when the social business hybrid operates in a business to

business sector. This paper investigates the role of founders’ background and

aspirations, and the nature of competition affecting variation in business models of

international SBHs. The research question that guides this study is “how do founders’

background and competitive conditions affect business model configurations of

international social-business hybrids?”

Through an inductive study of eleven ISSPs from India, Kenya and South

Africa, I identify four business model configurations that differ in strategic focus and

internal organization: strategically, ISSPs either serve international and domestic

clients, or exclusively domestic clients, and they either prioritize the social mission or

business opportunities. Organizationally, ISSPs either focus on low-cost (lower-

skilled) or differentiated (higher-skilled) services, and they either integrate or

decouple social mission and business operations. Findings reveal that, on the one

hand, entrepreneurs with an international background are typically more social

mission-driven and tend to invest into training beneficiary staff to be able to offer

differentiated services, whereas domestic entrepreneurs are often more business

opportunity-driven, invest little into staff development, and thus focus mostly on

routine low-cost services. Client choice and management, on the other hand, are

27

mainly explained by how entrepreneurs respond to ‘liability of embeddedness’, i.e.

perceived disadvantages in trying to win clients outside the community in which their

social mission is highly valued. For highly competitive environments and markets

such as India (e.g., the business process outsourcing industry in India), this “liability”

is particularly high, which is why ISSP founders often focus on domestic clients that

buy into the social mission more easily. Such ISSPs also typically integrate social

mission and business operations. On the other hand, in less developed and less

competitive contexts, such as Africa, ISSP founders also target international clients.

To meet global client expectations, ISSPs often decouple social mission and business

operations, thus further mitigating liability of embeddedness.

Next, I summarize the three different studies that form a part of this thesis in

Table 2.

Table 2 Summary of the 3 papers

Overarching Question What are core strategies and contingencies of

managing social-business hybrids in global contexts?

Particular Questions (1) How do

hybrids in global

supply chains

balance growth

opportunities and

social–business

tensions?

(2) Under what

conditions are

the adoption of

hybrid models a

feasible strategic

opportunity for

firms that

operate in Sub-

Saharan Africa

and serve

regional and

global clients?

(3) How do

founders’

background and

competitive

conditions affect

business model

configurations

of international

social-business

hybrids?

Data Collection Multiple embedded case study design in the field of

global outsourcing/impact sourcing: series of interviews

with ISSP entrepreneurs, policy-makers, experts in

India, US, Kenya, South Africa; secondary documents

(consulting reports, reports of Rockefeller Foundation,

…)

28

Dependent Variables Growth

orientation and

social-business

tensions.

Adoption of

Hybrid Models

vis a vis regular

business models

in Sub-Saharan

Africa.

Variation in

business models

of Social

business

hybrids.

Theoretical

Lens/Framework

Paradox

theory/paradox

dynamics

e.g., Schad et al.

(2016); Smith

and Lewis

(2011)

Tripod Model of

Strategic

Analysis (Peng

et al., 2008,

2009)

Social Business

Models (Yunus

et al., 2010);

Globalization of

Social

Enterprises

(Zahra et al.,

2008, 2013);

Independent

Variables

Location of

business clients,

community

settings.

Economic and

industry

conditions,

institutional

conditions, firm

resources, and

capabilities.

Founders’ prior

experience and

competitive

positioning of

regions.

29

References

Altenburg, T., Schmitz, H., & Stamm, A. (2008). Breakthrough? China’s and India’s

transition from production to innovation. World development, 36(2), 325-344.

Andre´, K., & Pache, A. C. (2016). From caring entrepreneur to caring enterprise:

Addressing the ethical challenges of scaling up social enterprises. Journal of Business

Ethics, 133(4), 659–675.

Athreye, S. 2005. "The Indian software industry and its evolving service capability".

Industrial and Corporate Change, 14(3), 393-418.

Aurini, J. (2006). Crafting legitimation projects: An institutional analysis of private

education businesses. In Sociological Forum (Vol. 21, No. 1, pp. 83-111). Springer

US.

Battilana, J., & Dorado, S. (2010). Building sustainable hybrid organizations: The

case of commercial microfinance organizations. Academy of Management

Journal, 53(6), 1419-1440.

Battilana, J., & Lee, M. (2014). Advancing research on hybrid organizing–Insights

from the study of social enterprises. Academy of Management Annals, 8(1), 397-441.

Battilana, J., Lee, M., Walker, J., & Dorsey, C. (2012). In search of the hybrid

ideal. Stanford Social Innovation Review, 10(3), 50-55.

Battilana, J., Sengul, M., Pache, A. C., & Model, J. (2015). Harnessing productive

tensions in hybrid organizations: The case of work integration social

enterprises. Academy of Management Journal, 58(6), 1658-1685.

Billis, D. (2010). Towards a theory of hybrid organizations. Hybrid Organizations

and the Third Sector. Basingstoke: Palgrave Macmillan, 46-69.

Bresnahan, T., Gambardella, A., & Saxenian, A. (2001). ‘Old economy’inputs for

‘new economy’outcomes: cluster formation in the new Silicon Valleys. Industrial and

corporate change, 10(4), 835-860.

Bulloch G, Long J. 2012. Exploring the Value Proposition of Impact Sourcing.

Rockefeller Foundation, January. Available at:

https://www.rockefellerfoundation.org/app/uploads/Exploring-the-Value-Proposition-

for-Impact-for-Impact-Sourcing.pdf (accessed on 26 November 2015).

Carroll, A. B. (1999). Corporate social responsibility: Evolution of a definitional

construct. Business & society, 38(3), 268-295.

Davenport, T. H. (2005). The coming commoditization of processes. Harvard

business review, 83(6), 100-108.

30

Defourny, J., and Nyssens, M. 2008. “Social Enterprise in Europe: Recent Trends and

Developments”. Social Enterprise Journal, 4(3), 202–228.

Diesing, P. (1979). Patterns of discovery in the social sciences. New Brunswick:

Transaction Publishers.

Doh, J., Guay, T. 2006. "Corporate social responsibility, public policy, and NGO

activism in Europe and the United States: An Institutional‐Stakeholder Perspective."

Journal of Management Studies, 43(1), 47-73.

Dossani, R., Kenney, M. 2007. "The next wave of globalization: relocating service

provision to India." World Development, 35(5), 772-791.

Ebrahim, A., Battilana, J., & Mair, J. (2014). The governance of social enterprises:

Mission drift and accountability challenges in hybrid organizations. Research in

Organizational Behavior, 34, 81-100.

Eisenhardt, K. M. (1989). Building theories from case study research. Academy of

Management Review, 14(4), 532–550.

Eisenhardt, K. M., & Graebner, M. E. (2007). Theory building from cases:

Opportunities and challenges. Academy of Management Journal, 50(1), 25–32.

Ethiraj, S., Kale, P., Krishnan, M., Singh, J. 2005. "Where do capabilities come from

and how do they matter? A study in the software services industry". Strategic

Management Journal, 26(1), 25-45.

Farrell, D. (2005). Offshoring: Value creation through economic change. Journal of

Management Studies, 42(3), 675-683.

Freeman, R. (2006). "Does globalization of the scientific/engineering workforce

threaten US economic leadership?". In Innovation Policy and the Economy, Volume

6, pp. 123-158. The MIT Press.

Friedland, R., & Alford, R. R. (1991). Bringing society back in: Symbols, practices

and institutional contradictions.

Ghemawat, P. (2011). World 3.0: Global Prosperity and How to Achieve It.

Cambridge, MA: Harvard Business Press.

Giddens, A. (2013). The Consequences of Modernity. John Wiley & Sons.

Greenwood, R., & Hinings, C. R. (1993). Understanding strategic change: The

contribution of archetypes. Academy of Management Journal, 36(5), 1052-1081.

Greenwood, R., Raynard, M., Kodeih, F., Micelotta, E. R., & Lounsbury, M. (2011).

Institutional complexity and organizational responses. Academy of Management

Annals, 5(1), 317-371.

31

Glynn, M. 2000. "When cymbals become symbols: Conflict over organizational

identity within a symphony orchestra." Organization Science, 11(3), 285-298.

Haas, P. 2004. "Addressing the Global Governance Deficit." Global Environmental

Politics, 4(4), 1–15.

Hahn, T., Pinkse, J., Preuss, L., & Figge, F. (2015). Tensions in corporate

sustainability: Towards an integrative framework. Journal of Business Ethics, 127(2),

297–316.

Haigh, N., & Hoffman, A. J. (2014). The new heretics: Hybrid organizations and the

challenges they present to corporate sustainability. Organization &

Environment, 27(3), 223-241.

Haigh, N., Walker, J., Bacq, S., & Kickul, J. (2015). Hybrid organizations: origins,

strategies, impacts, and implications. California Management Review, 57(3), 5-12.

Hannan, M. T., & Freeman, J. (1986). Where do organizational forms come from?

In Sociological forum (Vol. 1, No. 1, pp. 50-72). Kluwer Academic Publishers.

Haveman, H. A., & Rao, H. (2006). Hybrid forms and the evolution of

thrifts. American Behavioral Scientist, 49(7), 974-986.

Hoffman, A. J., Badiane, K. K., & Haigh, N. (2010). Hybrid organizations as agents

of positive social change: Bridging the for-profit & non-profit divide. Golden-Biddle,

K. and Jane Dutton, J. (eds). Using a Positive Lens to Explore Social Change and

Organizations: Building a Theoretical and Research Foundation (New York:

Routledge, Taylor and Francis Group): 131-153.; Ross School of Business Paper No.

1149.

IAOP. (2012). Does corporate social responsibility matter? International Association

of Outsourcing Professionals. Retrieved from IAOP:

https://www.iaop.org/content/23/126/1698.

International Labour Organization. 2011. 'Increasing The Employability Of

Disadvantaged Youth.' In Skills For Employment- Policy Brief. Geneva: International

Labour Organization.

Jay, J. (2013). Navigating paradox as a mechanism of change and innovation in

hybrid organizations. Academy of Management Journal, 56(1), 137-159.

Khanna, T., Palepu, K. 2000. "The future of business groups in emerging markets:

Long-run evidence from Chile." Academy of Management Journal, 43(3), 268-285.

Kraatz, M., and Block, E. 2008. 'Organizational implications of institutional

pluralism.' In R. Greenwood, C. Oliver, R. Suddaby, & K. Sahlin-Andersson (Eds.),

The Sage handbook of organizational institutionalism: 243–275. Thousand Oaks, CA:

Sage.

32

Lee, M. (2014). Mission and markets? The viability of hybrid social ventures.

Academy of Management Proceedings, 2014(1), p. 13958.

Lee, M., & Battilana, J. (2013). How the zebra got its stripes: Imprinting of

individuals and hybrid social ventures.

Levy, D. 2005. "Offshoring in the New Global Political Economy." Journal of

Management Studies, 42(3), 685–693.

Lewin, A. Y., Massini, S., & Peeters, C. (2009). Why are companies offshoring

innovation? The emerging global race for talent. Journal of International Business

Studies, 40(6), 901-925.

Lewis, M. W. (2000). Exploring paradox: Toward a more comprehensive

guide. Academy of Management Review, 25(4),

760–776.

Lorenzen, M., & Mudambi, R. (2012). Clusters, connectivity and catch-up:

Bollywood and Bangalore in the global economy. Journal of Economic

Geography, 13(3), 501-534.

Mair, J., & Noboa, E. (2006). Social entrepreneurship: How intentions to create a

social venture are formed. In Social entrepreneurship (pp. 121-135). Palgrave

Macmillan UK.

Manning, S. 2013. “New Silicon Valleys or a New Species? Commoditization of

Knowledge Work and the Rise of Knowledge Services Clusters”. Research Policy,

42(2), 379–390.

Manning, S., Lewin, A., & Massini, S. (2008). A dynamic perspective on next-

generation offshoring: The global sourcing of science and engineering talent.

Academy of Management Perspectives,

22(3), 35–54.

Marquis, C., Park, A. 2014. “Inside the Buy-One Give-One Model.” Stanford Social

Innovation Review, 1–7.

Matten, D., & Crane, A. (2005). Corporate citizenship: Toward an extended

theoretical conceptualization. Academy of Management Review, 30(1), 166-179.

Nanda, R., & Khanna, T. (2010). Diasporas and domestic entrepreneurs: Evidence

from the Indian software industry. Journal of Economics & Management

Strategy, 19(4), 991-1012.

Pache, A. C., & Santos, F. (2013). Inside the hybrid organization: Selective coupling

as a response to competing institutional logics. Academy of Management

Journal, 56(4), 972-1001.

33

Pache, A. C., & Santos, F. (2010). When worlds collide: The internal dynamics of

organizational responses to conflicting institutional demands. Academy of

management review, 35(3), 455-476.

Patibandla, M., & Petersen, B. (2002). Role of transnational corporations in the

evolution of a high-tech industry: the case of India's software industry. World

Development, 30(9), 1561-1577.

Peng M, Wang DYL, Jiang Y. 2008. An Institution-Based View of International

Business Strategy: A Focus on Emerging Economies. Journal of International

Business Studies 39 (5): 920-936.

Peng M, Sun SL, Pinkham B, Chen B. 2009. The Institution-Based View as a Third

Leg for a Strategy Tripod. Academy of Management Perspectives 23 (3): 63-81.

Porter, M. E., & Kramer, M. R. (2011). Creating shared value: Redefining capitalism

and the role of the corporation in society. Harvard Business Review, 89(1/2), 62-77.

Rallis, S. F., & Rossman, G. B. (1998). Learning in the field: An introduction to

qualitative research. Learning in the field: an introduction to qualitative research.

Reddy, P. (1997). New trends in globalization of corporate R&D and implications for

innovation capability in host countries: a survey from India. World

development, 25(11), 1821-1837.

Reinecke, J., Manning, S., von Hagen, O. 2012. "The Emergence of a Standards

Market: Multiplicity of Sustainability Standards in the Global Coffee Industry."

Organization Studies, 33(5–6), 791–814.

Robinson, J. (2006). Navigating social and institutional barriers to markets: How

social entrepreneurs identify and evaluate opportunities. In Social

entrepreneurship (pp. 95-120). Palgrave Macmillan UK.

Rockefeller Foundation. 2013. Dahlberg Report- Digital Jobs in Africa: Catalyzing

Inclusive Opportunities for Youth. Available at:

https://www.rockefellerfoundation.org/report/digital-jobs-in-africa-catalyzing-

inclusive-opportunities-for-youth/ (accessed 10 October 2016).

Rockefeller Foundation. 2011. "Impact Sourcing Conference Report." Rockefeller

Foundation.

Romanelli, E. (1991). The evolution of new organizational forms. Annual review of

sociology, 17(1), 79-103.

Santos, F., Pache, A. C., & Birkholz, C. (2015). Making hybrids work. California

Management Review, 57(3), 36-58.

34

Schad, J., Lewis, M. W., Raisch, S., & Smith, W. K. (2016). Paradox research in

management science: Looking back to move forward. Academy of Management

Annals, 10(1), 5–64.

Scherer, A. G., & Palazzo, G. (2007). Toward a political conception of corporate

responsibility: Business and society seen from a Habermasian perspective. Academy

of management review, 32(4), 1096-1120.

Selsky, J. W. 2005. “Cross-Sector Partnerships to Address Social Issues: Challenges

to Theory and Practice.” Journal of Management 31(6), 849–873.

Smith, W. K., Binns, A., & Tushman, M. L. (2010). Complex business models:

Managing strategic paradoxes simultaneously. Long range planning, 43(2), 448-461.

Smith, W. K., Gonin, M., & Besharov, M. L. (2013). Managing social-business

tensions: A review and research agenda for social enterprise. Business Ethics

Quarterly, 23(3), 407-442.

Smith, W. K., & Lewis, M. W. (2011). Toward a theory of paradox: A dynamic

equilibrium model of organizing. Academy of Management Review, 36(2), 381–403.

Smith, W., Tushman, M. 2005. "Managing Strategic Contradictions: A Top

Management Model for Managing Innovation Streams." Organization Science, 16(5),

522–536.

Sood, A., Arora, B. (2006). "The political economy of corporate responsibility in

India." UNRISD Technology, Business and Society Programme Paper Number 18, 1-

84

Soskice, D. W., & Hall, P. A. (2001). Varieties of capitalism: The institutional

foundations of comparative advantage. Oxford: Oxford University Press.

The Africa Report, 2012. Outsourcing: The Indian connection and Africa.

http://www.theafricareport.com/North-Africa/outsourcing-the-indian-connection-and-

africa.html (accessed 30 November 2015).

Thornton, P. H., & Ocasio, W. (1999). Institutional logics and the historical

contingency of power in organizations: Executive succession in the higher education

publishing industry, 1958–1990. American journal of Sociology, 105(3), 801-843.

Utting, P. 2007. "CSR and Equality." Third World Quarterly, 28(4), 697–712.

Vurro, C., Dacin, T., Perrini, F. 2010. "Institutional Antecedents of Partnering for

Social Change: How Institutional Logics Shape Cross-Sector Social Partnerships."

Journal of Business Ethics, 94(1), 39–53.

Waldman, A. (2004). ‘What India's upset vote reveals: the high tech is skin deep.'

New York Times, 15 May 2004.

35

Weerawardena, J., & Mort, G. S. (2006). Investigating social entrepreneurship: A

multidimensional model. Journal of world business, 41(1), 21-35.

Yin, R. K. (2008). Case study research: Design and methods. Sage publications.

Yunus, M., Moingeon, B., & Lehmann-Ortega, L. (2010). Building social business

models: Lessons from the Grameen experience. Long range planning, 43(2), 308-325.

36

CHAPTER 2

HOW HYBRIDS MANAGE GROWTH AND SOCIAL-BUSINESS TENSIONS IN

GLOBAL SUPPLY CHAINS: THE CASE OF IMPACT SOURCING

Introduction

Management scholars have increasingly examined how organizations manage

tensions between differing objectives and stakeholder demands (Pache and Santos,

2010; Smith and Tushman, 2005; Oliver, 1991). More specifically, there has been

growing interest in paradoxes, or ‘contradictory yet interrelated elements that exist

simultaneously and persist over time’ (Smith and Lewis, 2011) – elements that seem

logical in isolation, but irrational when viewed simultaneously (Lewis, 2000; Schad et

al., 2016; Hahn et al. 2015). Hybrid organizations (or hybrids) are increasingly

important organizational forms that embrace a central paradox: the simultaneous

pursuit of social missions and financial objectives (Battilana and Lee, 2014). Tensions

intensify when hybrids operate globally – simultaneously catering to international

clients and local communities (Marquis and Battilana, 2009). We seek to better

understand how hybrids operating in global markets manage this tension in the

context of growth.

37

Prior studies have examined social-business tensions of hybrids and

challenges of growth separately. On the one hand, scholars have emphasized ways

that hybrids combine, balance or decouple practices and structures to meet social and

commercial demands (Battilana and Lee, 2015; Pache and Santos, 2013). On the

other hand, studies have investigated the challenges of growth in terms of entering

new markets, acquiring new clients, and expanding the scale and scope of operations

(Battilana & Dorado, 2010; Boyd et al., 2009; Lumpkin et al., 2013; Weerawardena &

Mort, 2006). For example, scholars have discussed “mission drift” – when growing

hybrids ‘drift away’ from social goals in favor of commercial goals (Haigh and

Hoffman, 2012), but have also found that hybrids have managed growth and their

pursuit of social and business objectives without tension (Haigh et al., 2015a).

In this paper, we examine how hybrids approach growth (their "growth

orientations") while managing paradoxical social—business objectives. By growth

orientations, we mean approaches to growth or ways of growing that include choices

regarding the pace of growth, managing stakeholder relationships, and balancing

competing demands. While growth orientations do not determine actual growth, they

do prepare hybrids for managing growth in certain ways. Our guiding research

question is: How do hybrids in global supply chains balance growth opportunities

and social—business tensions?

We investigate this question for the empirical case of hybrid organizations

operating in global supply chains (GSCs) within the global service outsourcing

industry. Businesses operate within globally distributed production and service

delivery systems connecting dispersed clients and suppliers (Gereffi et al., 2005;

Mudambi, 2008). Global service outsourcing refers to companies sourcing services

38

such as payroll, tech support, call centers, and software testing and engineering from

specialized providers in other countries (Doh, 2005; Manning et al. 2008; Massini and

Miozzo, 2012). Within this context, Impact Sourcing Service Providers (ISSPs) have

recently emerged. ISSPs are an interesting example of hybrids operating in GSCs.

ISSPs are similar to regular service providers like Infosys, Genpact, and Accenture in

delivering low-cost, high-quality services to (predominantly) Western clients, but

unlike them ISSPs promote inclusive employment through ‘impact sourcing’ (IS) -

hiring and training people from disadvantaged groups in local communities

(beneficiaries) (Rockefeller Foundation, 2011; 2013).

Hybrids serving global markets become ‘embedded’ in relationships with

international/domestic clients and local communities (Uzzi, 1997; Gulati, 1995;

Gulati & Gargiulo, 1999). Communities include rural and urban settings that are

typically small-scale, geographically bounded, and have strong ties and common

identities (Marquis & Battilana, 2009; Freeman and Audia, 2006; Portes and

Sensenbrenner, 1993). Prior research (e.g., Kistruck & Beamish, 2010; Maak &

Stoetter, 2012; Mair et al., 2012; Montgomery et al., 2012) has often focused on

interactions of hybrids and communities without considering the client perspective,

yet, hybrids operating in GSCs need to cater to local communities and sophisticated

clients. Balancing these demands becomes particularly difficult with growth.

Based on an inductive multi-case study of twelve ISSPs from around the

world, we differentiate two major orientations towards growing and managing social-

business tensions: ‘community-focused’ and ‘client-focused’ growth. Community-

focused growth denotes an approach orchestrating slower growth within the

constraints of integrated community and client relationships. ISSPs with this

39

orientation often operate from rural areas and serve co-located or domestic clients that

share the social context and support the social mission. Social-business tensions are

managed by developing community-centered solutions, e.g., aligning client

expectations with workforce capacity through training and sensitizing them about the

community. In contrast, client-focused growth seeks faster growth driven by pressure

and aspirations to expand while managing social missions independently. ISSPs with

this orientation often cater to international clients from more developed, mostly urban

areas, and tensions are managed through client-centered solutions, e.g., certifying the

workforce to independent third-party standards. Importantly, entrepreneurial

aspirations can be both a driver of growth orientations and a source of conflict.

Conflicts may lead entrepreneurs to move from one growth orientation to another and

thereby manage social-business tensions in new ways.

Our findings have important theoretical and research implications. First, we

discuss how being part of GSCs may affect hybrid growth strategies. We add to prior

research by discussing the influence of rural vs. urban community settings and

geographic distance to clients on growth opportunities and constraints. Second, we

provide a more contextualized analysis of how paradoxical social—business tensions

are perceived and managed. Based on the idea that paradoxical tensions can never be

resolved completely (Smith and Lewis, 2011), we show that among hybrids in global

supply chains, specific drivers, such as growth orientations and entrepreneurial

aspirations, can turn latent into manifest social-business tensions and re-activate

cycles of realizing and managing these tensions. We thus contribute to a more

relational and contextual understanding of paradox dynamics (Schad et al., 2016), and

suggest that paradox literature could benefit from a ‘spatial turn’ in its analysis of

40

tensions. Third, we extend the prior debate on the social impact of outsourcing by

discussing the growing importance of IS as a responsible practice.

We begin with a review of prior research on growth and management of

tensions among hybrid organizations. We then discuss the need to study hybrids in

GSCs and introduce the case of IS. This is followed by a presentation of our methods,

case data and findings, and a discussion of theoretical and research implications.

Hybrid Organizations: Characteristics, Tensions, and Growth

In a broader sense, hybrid organizations are any “organizations that possess

‘significant’ characteristics of more than one sector (public, private and third)” (Billis,

2010: 3). For this study, we focus on hybrids operating in the private/third zone

between traditional for-profit firms and third sector (non-profit) organizations. In

further defining hybrids we note that practitioners and scholars have at various times

considered social enterprises to be a type of hybrid or vice versa (e.g., Alter, 2007;

Battilana and Lee, 2014). We follow others in using the terms interchangeably (e.g.,

Waddock and McIntosh, 2011; Haigh et al., 2015b; Santos et al., 2015). The hybrids

on which we focus sit at intermediate points between for-profit firms with no social

mission and non-profit charities sustained with grants and philanthropy. Their

intermediate position gives hybrids flexibility to complement established

organizational forms and practices to meet their social and business goals (Haveman

and Rao, 2006, Pache and Santos, 2013), such as combinations of legal registration

(for-profit and non-profit), revenue streams (philanthropic and earned), practices

(particularly HR practices), and strategies.

41

The organizational forms adopted by hybrids arise from their multiple

institutional logics (Greenwood et al., 2011; Battilana and Dorado, 2010), which are

defined as taken-for-granted beliefs and practices that guide behavior (Friedland and

Alford, 1991; Thornton and Ocasio, 1999). Logics provide the cultural materials

through which organizational forms are constructed (Greenwood and Hinings, 1993).

Hybrids often combine two specific logics: the business logic of revenue and profit

generation by providing commercial goods or services, and the logic of societal

welfare by providing services that positively affect social and ecological systems

(Smith et al., 2013). More than other organizational forms, hybrids have the potential

to integrate social missions into a feasible business model (Jay, 2013; Porter and

Kramer, 2011; Haigh and Hoffman, 2014), yet this potential can also translate into

challenges, as social and commercial concerns compete for resources in growth

efforts (Pache and Santos, 2013; Jay, 2013). While many organizations face

conflicting stakeholder and institutional demands (e.g., Pache and Santos, 2010), it is

pronounced among hybrids due to their plural goals (Battilana and Lee, 2014; Smith

et al., 2013).

Previous research suggests that hybrid organizations experience tension in

multiple forms, and has used paradox theory to examine them. In line with Smith et

al. (2013), our study particularly focuses on performing, learning and belonging

tensions (see also Smith and Lewis, 2011). Performing refers to the need to

simultaneously achieve goals in line with conflicting stakeholder expectations (see

also Jay, 2013). Learning is about adjustments needed when moving from past to

future, such as conflicting time horizons related to scalability, flexibility, and growing

both impact and business. Belonging refers to conflicts between individual and

42

organizational identities and objectives (see also Pache and Santos, 2010; Hahn et al.

2015; Battilana et al. 2012). Smith and Lewis (2011) argue that a major characteristic

of paradoxical tensions is their persistence over time - the continuous dynamic

between their manifestation, partial acceptance, and accommodation, which may

trigger new manifestations. Yet, we lack an understanding of how such dynamics

unfold in particular contexts (Schad et al. 2016). We seek to identify key mechanisms

by which social-business tensions become salient especially in the context of GSCs,

and how hybrids manage such tensions.

Prior studies have addressed several ways that hybrids manage social—

business tensions, such as selectively combining, balancing or decoupling practices,

identities, bottom lines, accountabilities, and structures (see Battilana and Lee, 2014;

Mair et al., 2015; Pache and Santos, 2013; Tracey and Phillips, 2007). According to

Aurini (2006), hybrids practice "decoupling" by internalizing some practices while

symbolically adopting others to demonstrate external legitimacy. Some hybrids

balance by selectively combining governance and/or operational practices from a

single social or business logic (Mair et al., 2015) or multiple logics (Mair et al., 2015;

Pache and Santos, 2013), by building mechanisms to connect to stakeholders (Tracey

& Phillips, 2007), or by developing new governance or operational practices

(Battilana and Dorado, 2010; Mair et al., 2015). However, Battilana and Lee (2014)

argue that among hybrids there are differences in the way and extent to which they

address social-business tensions. Also, some tensions appear persistent and are

managed by maintaining space for them (Battilana et al., 2015) and their potential for

paradoxical outcomes (Jay, 2013). A more contextualized analysis of hybrids and

their tensions is needed that specifies how and when social-business tensions become

43

manifest and subject to efforts to manage then, and the limitations of managing such

tensions.

One critical and little-understood context within which managing social-

business tensions becomes important is growth. Many prior studies have

conceptualized growth of scale and scope in the context of hybrids as a challenge by

itself (Battilana & Dorado, 2010; Boyd et al., 2009; Lumpkin et al., 2013;

Weerawardena & Mort, 2006). However, in several sectors, such as global service

outsourcing, being able to grow and develop business capabilities is almost a

precondition for becoming visible by global clients (Mudambi, 2008; Kannothra and

Manning, 2015). It is thus critical for hybrids in the global service outsourcing sector

to balance growth opportunities and social-business tensions.

Previous work on hybrid growth has focused mainly on the pace of growth

and related challenges. Some hybrids pursue slower growth, seeking to achieve just

enough growth to enable them to remain economically viable while sacrificing the

opportunity to grow quickly or exponentially (Boyd et al., 2009; Lumpkin et al.,

2013). Other hybrids may be constrained by resources that are not available in large

quantities, such as organically produced food or recycled plastics (Lee and Jay, 2015)

or operate a business model where trainees constitute much of their workforce

(Battilana and Dorado, 2010). For other hybrids, faster growth is possible and makes

sense because sales correlate with the degree to which they can pursue their social

mission. However, in doing so, hybrids often compete with larger firms (Lee and Jay,

2015), which is why fast growth often implies ‘mission drift' (Ebrahim et al., 2014)

and loss of social identity (Andre and Pache, 2016).

44

We lack an integrated understanding of how hybrids approach growth and

manage social-business tensions. We argue and show that, rather than dealing with

‘mission drift’ as a potential consequence of growth, hybrids develop ‘growth

orientations’ that incorporate certain ways of managing social-business tensions.

Choosing a certain growth orientation influences which social-business tensions

become manifest and either ‘accepted’ or subject to certain managerial solutions.

Thereby, tensions manifest themselves in context-specific ways. In global supply

chains, hybrids manage social-business tensions between meeting local community

and global client demands. We introduce this context next.

Hybrid Models in Global Supply Chains: The Case of Impact Sourcing

GSCs are embedded in and are established by complex client-supplier

relationships (see, e.g., Henderson et al., 2002). Suppliers – both mainstream and

hybrid – build relationships with both international clients and locally situated

communities that provide access to important resources, such as labor, expertise, and

process support. Research on mainstream suppliers suggests that two conditions are

important to competing and growing within GSCs. First, suppliers may depend

predominantly on local and domestic resource and competitive conditions (Porter,

1990, 2000). In this regard, suppliers benefit from being part of geographic clusters,

where locally bounded concentrations of specialized firms and related institutions

serve particular industry demands (Porter, 2000). Being part of such a cluster

facilitates access to global clients, talent, and innovation, thus supporting growth

(Humphrey and Schmitz, 2002), but can also increase competitive pressure (Pouder

and St. John, 1996). Second, supplier growth strategies may be influenced by

geographic and institutional distance to major clients (Yeung et al., 2006; Manning et

45

al., 2015). Suppliers often face trade-offs between growth opportunities associated

with serving distant global clients and developing trust and effective relations with

them. Geographic distance makes it difficult to understand and compete for client

needs compared to local competitors, which results in many suppliers choosing to set

up foreign operations in major client markets (Martin et al., 1998). Institutional

distance, in terms of differences in norms, regulations, and practices (Kostova, 1999),

also increases uncertainty and transaction costs for global clients, which prompts

suppliers to invest in client-specific capabilities to better understand and serve them.

We seek to understand how these types of conditions affect hybrid in GSCs,

and how they affect growth orientations and the ability of hybrids to manage social—

business tensions. Prior research emphasizes the need of hybrids to invest into local

community relationships to gain access to critical resources and fulfill their social

mission (Hoffman et al., 2012; Kistruck & Beamish, 2010; Maak & Stoetter, 2012;

Mair et al., 2012; Montgomery et al. 2012), but their close and bounded nature

(Marquis & Battilana, 2009) can also restrict growth. Scholars have identified

differences between operating out of rural and urban settings (Freeman & Audia,

2006; Marquis et al., 2011; Portes & Sensenbrenner, 1993), which parallels the

discussion on benefits and challenges of geographic clusters in the mainstream

business literature (see Porter & Kramer, 2011). However, what is missing is the dual

embeddedness of hybrids in both local community and global client relationships, and

its implication for how they grow and manage tensions. We examine this issue for the

case of IS.

The digitalization and commoditization of business processes (Davenport

2005) created opportunities for companies in developed and developing countries to

46

specialize in providing IT services, call centers, tech support and analytical services,

as (predominantly) Western clients outsourced them (Mudambi, 2008) to leverage

cost, speed, time-zone, talent and other advantages (Reddy, 1997; Lewin et al. 2009).

From this, a global service outsourcing industry has emerged that includes large full-

service providers and smaller, more specialized vendors.

India has become the largest global service outsourcing destination for U.S.

and European firms (Patibandla and Petersen 2002). Other countries and regions like

Africa and Latin America have followed India to promote their own economic

development (Manning 2013). However, these efforts have typically focused on

urban, highly-trained professionals, while neglecting rural, unskilled, or

disadvantaged people. The promotion of more inclusive employment and

development through IS was driven by the Rockefeller Foundation, which launched

IS pilot projects in Kenya, Ghana, South Africa and Nigeria, and started supporting

and funding the adoption of IS models in 2011.

Accenture (2012) estimated the global IS market was worth US$6 billion in

2010 (4% of the global service outsourcing market). Another study commissioned by

Rockefeller Foundation estimated that the IS market will grow to 17% of business

outsourcing spending, and employ 3 million people worldwide by 2020 (Avasant,

2012). Recent studies also suggest that global clients will support IS by linking

outsourcing to corporate social responsibility initiatives (IAOP, 2012). However,

clients also continue to prioritize service cost and quality regardless of whether they

contract with regular or IS vendors (Accenture, 2012).

47

Data and Methods

We adopt an inductive qualitative case study approach to examine ISSP

growth orientations and management of social-business tensions. Qualitative methods

are justified for exploring complex phenomena about which little is known and about

which a novel understanding is needed (Strauss and Corbin, 1998). IS is a complex

and novel trend that has not been investigated in depth. We use a multi-case design

following a ‘replication logic' (Yin 2008) and promoting ‘generalization in small

steps' (Diesing, 1979). We selected ISSP cases aiming for literal and theoretical

replication: Literal replication means that case analysis is replicated for similar cases

to increase the robustness and validity of findings, while theoretical replication

expands the variety of cases along relevant criteria (Yin, 2008).

We used the notion of GSCs as a sensitizing device for case selection and

analysis. Sensitizing devices do not ‘provide prescriptions of what to see' but can

‘suggest directions along which to look' (Blumer, 1954). We selected cases according

to types of clients and communities served - reflecting their embeddedness in GSCs.

We studied 12 ISSPs in Kenya, South Africa, India and the U.S. - these four

outsourcing destinations are among the most important in adopting IS (Lacity et al.,

2012). We analyzed the cases as part of one case pool given that the main dimensions

used to conduct analysis applied across national boundaries. Our case selection

technique and theoretical replication approach allowed us to differentiate findings

along theoretically useful and meaningful criteria (Eisenhardt, 1989; Eisenhardt and

Graebner, 2007).

Two authors collected both interview and secondary data for each case. ISSPs

were chosen based on those listed as important in prior studies, such as Lacity et al.

48

(2012), and by scanning archival reports and case studies produced by Rockefeller

Foundation. Case access was facilitated during interviews with representatives of

intermediary organizations, such as Rockefeller Foundation, NASSCOM Foundation,

and local business promotion agencies. Rockefeller Foundation1 and NASSCOM

Foundation2 maintain online IS resources aimed at promoting the sector and providing

reliable archival data on ISSPs.

We conducted 38 semi-structured interviews between 2012 and 2014 with

managers of ISSPs, service outsourcing experts, policy-makers, business promotion

agents and Rockefeller representatives (see Table 3). Interviews with actors external

to ISSPs were critical for understanding the context and generic challenges of IS. To

increase external validity and robustness of our findings (Yin, 2008), we also

collected secondary archival data on each ISSP through websites, and on well-known

ISSPs, such as Samasource, as well as policy reports and practitioner articles on IS

(also see Table 3).

Table 3 Overview of data

Source Number

Primary Data: semi-structured interview

Kenya



Policy Makers 2

Experts 2

South Africa


1 Rockefeller Foundation portal on Impact Sourcing can be found at

https://www.rockefellerfoundation.org/our-work/initiatives/digital-jobs-africa/

(accessed on 12/01/2016). 2 NASSCOM Foundation portal on Impact Sourcing can be found at

http://www.nasscomfoundation.org/get-engaged/impact-sourcing.html (accessed on

12/01/2016).

https://www.rockefellerfoundation.org/our-work/initiatives/digital-jobs-africa/

http://www.nasscomfoundation.org/get-engaged/impact-sourcing.html

49


Policy Makers 4

Experts 2

US



Policy Makers 2

Experts -

India



Policy Makers 1

Experts -

Total number of interviews 38

Secondary Data:

Rockefeller Foundation (reports, articles,

cases)

30

ISSP Websites 12

Accenture Development Partnership

(report)

2

Avasant Consultants (report) 1

Digital Divide Data Impact Report 1

World Bank ICT Unit (report)

IEEE Readynotes: Rural Sourcing & Impact

Sourcing

1

1

Total number of secondary sources 48

Four rounds of data collection were carried out. First, one author conducted an

explorative field trip to Kenya in 2012 to study the local outsourcing industry and IS

in particular. Service providers in Kenya were among the first to adopt IS models. In

Kenya, 13 semi-structured interviews were conducted with ISSPs and policy-makers.

Interview questions focused on founding conditions, the scope of services, targeted IS

staff, client-seeking strategies, employment and training practices, growth strategy

and major managerial challenges. We followed the replication logic (Yin, 2008)

across other national contexts-in India, South Africa and the U.S. Cases were added to

increase robustness and further differentiate findings along critical dimensions, in

particular, types of client served and properties of sourcing location. The second field

50

trip was conducted in India in 2013 by another author. Nine interviews were

conducted with Indian ISSPs, policy-makers and representatives of the Indian

business association NASSCOM Foundation. Third, between 2013 and 2014 we

conducted four interviews with U.S. ISSPs and the Rockefeller Foundation to include

ISSPs in an advanced economy. The fourth round of data was collected in South

Africa, where thirteen interviews were conducted with mainstream service providers

and ISSPs, training institutes and the Rockefeller Foundation. Additional interviews

with mainstream service providers helped us further contextualize the challenges of

ISSPs.

As an important limitation of this study, we were not able to collect

longitudinal data on actual growth. However, interviews captured historical

information on ISSP founding conditions, present strategies, opportunities and

constraints, and entrepreneurial aspirations related to growth, target markets, and

social mission. Therefore, rather than analyzing the growth of ISSPs over time, we

focused on growth orientations of ISSPs. We thereby take a middle position between

growth as a structurally induced path and a product of deliberate agency (Giddens,

1984; Emirbayer and Mische, 1998). By studying hybrid growth orientation, we

highlight specific ways of growing while managing social—business tensions.

For data analysis, we first cross-tabulated interview responses across ISSPs. In

an initial round of coding, we focused on comparing key attributes of ISSPs, such as

types of business services provided, target employees, major clients, headquarter

location, and key strategic and operational challenges. We provide a selective

overview of these features in Table 4. Second, we inductively coded interviews to

derive growth orientations and related tensions. Figure 2 displays a coding tree

51

focusing on how we arrived at the two major growth orientations based on the first-

order and second-order analysis. To ensure inter-coder reliability, a sample of

interviews were coded independently by two authors.

Figure 2 Coding Tree

52

Major attributes of growth orientations derived from this analysis included:

targeted growth pace, the extent to which social and business objectives are coupled,

and the degree to which client and community relations are integrated or managed

independently. Third, all authors engaged in specifying the major growth orientations.

We followed the practice of axial coding (Corbin and Strauss, 2008) by relating

growth orientations to facilitating conditions (rural/urban location, and

local/international clients based on the pre-categorization of cases) and practices of

managing tensions. This analysis indicated that entrepreneurial aspirations were also

important. Fourth, we promoted analytical generalization (Yin, 2008) by developing a

theoretical model of hybrid growth orientation among ISSPs.

Empirical Findings

We first review major properties of the ISSPs studied, then differentiate cases

according to their client and community relationships. Following this, we explain two

major growth orientations found – community-focused and client-focused growth –

and relate them to the client and community relationships. We then introduce

entrepreneurial aspirations as a moderating variable and discuss how the growth

orientations relate to the management of social—business tensions.

Overview of the Cases

Table 4 summarizes key descriptive information for the ISSPs and Figure 3

displays how ISSPs are embedded in client and community relationships within the

services outsourcing industry. ISSPs in our sample served a wide range of clients and

provided a wide range of services. ISSPs either served clients directly or were

subcontractors, and some specialized in call center, customer support, and technical

helpdesk services to end users of their clients. Further, ISSPs sought various types of

53

skill development and employment for a range of beneficiaries. All ISSPs in our

sample employed both beneficiary (disadvantaged) and non-beneficiary (non-

disadvantaged) staff, with the latter forming less than 20% of the workforce in most

cases. Most non-beneficiary employees had minimum high school education and

several years’ experience and typically filled managerial and/or client-facing

positions, while beneficiary employees often had neither high school education nor

prior experience and worked behind the scenes.

Table 4 Summary of cases

Firm,

Country

Urban/Rural Clients

(Type/Nature)

Services

Provided

IS

Model/Practices

Size (No.

Employees)

Age

Invincible

Outsourcing

/Impact

Sourcing

Academy,

South Africa

Urban Local civic

governments,

domestic

telecom,

financial

service clients.

Voice

support, back

office

support,

transcription.

Work for study

model. Employs

students

attending the

Maharishi

Institute graduate

programs;

students get fee

waiver/living

expenses.

Size-500; Age- 7

years

iMerit, India Urban (and

some rural)

International:

Travel portals,

NGOs,

Publishing

Houses

Domestic:

Publishing

Houses.

Image

tagging,

content

digitization,

digital

publishing,

global help

desks (back

office tech

support),

social media

marketing,

online

content

Recruits and

trains rural and

urban youths

(from

marginalized

communities)

with the help of

its sister NGO.

Upskills and

employ them in

high-value

assignments.

Size-300; Age- 5

years

54

moderation,

etc.

Cayuse

Technologies,

USA

Rural Domestic:

Fortune 500

companies and

government

agencies

within the US;

anchor client-

large

consulting and

outsourcing

company

within the US.

Application

outsourcing,

infrastructure

outsourcing,

business

process

outsourcing.

Create

sustainable,

living wage jobs

for the Native

Americans and

local community

by providing

clients with a

low-cost rural-

shore

technologies

sourcing

solution.

Size-300; Age-

10 years

OTRA, India Rural Domestic:

Regional

telecom,

banking,

insurance and

retail

companies,

government

agencies.

Voice and

Non-Voice

services.

Data and

accounts

processing,

digitization,

customer

care, inbound

and

outbound

voice

services,

technical

help desks,

etc.

Rural

outsourcing

company

providing

employment

opportunities to

rural youth.

Subcontractors to

other major

outsourcing

companies.

Size-40; Age-5

years

Craft Silicon,

Kenya

Urban Domestic,

international;

banking

industry

specific.

IT Services,

BPO services

including

data services.

Recruits from

urban slums

while

maintaining a

non-beneficiary

work force.

Employees for

client facing

roles are based

out of India,

while the main

operation for

55

BPO services

located in Kenya.

Size-200; Age-

18 years

SamaSource,

USA

Rural &

Urban

International

(offshore,

nearshore and

onshore

operations)

and few

domestic.

Machine

learning,

data, image

and content

services.

Microwork

model where the

client acquisition

and quality

control are done

from the

headquarters.

The country

partners employ

unemployed

youths in various

digital jobs.

Size-950; Age 8

years

DesiCrew,

India

Rural Domestic and

some

international.

Data

management,

digitization,

content

management,

machine

learning and

lead

generation

for clients.

Operates out of

multiple rural

locations in

India; employs

people from

disadvantaged

groups and

provides partial

fee

reimbursement

for continuing

education.

Size-500; Age-

11 years

Harva, India Rural Domestic;

educational

institutes and

government

departments.

Data

management,

digitization

and call

centers in

regional

languages.

Rural BPO

model for

employment

generation. Also

runs a

microfinance

program that

provides loan to

the employees.

Size-50; Age- 4

years

B2R, India Rural Domestic and

international;

publishing

houses,

E-

Publishing,

Web

research,

Opened delivery

centers in a

remote state with

no

56

financial and

legal services,

B2B portals,

etc.

data

management,

back office

services.

IT/outsourcing

background; 33%

of PAT

reinvested in the

community.

Size-300; Age- 7

years

Rural

Shores, India

Rural Domestic

clients-

telecom,

insurance and

financial

services, local

governments.

Digitization,

corporate

services, IT

help desk,

etc.

Profit sharing

model with rural

entrepreneurs, tie

up with

community

organizations for

recruiting.

Size-2500; Age-

5 years

Vindhya e

Infomedia,

India

Urban Public offices

and utility

companies,

large

outsourcing

company.

Digitization,

customer

service desk,

data

management.

Employs mostly

people with

disabilities,

recruitment

based on

referrals.

Size-200; Age-

11 years

Digital

Divide Data,

Kenya

Urban Domestic and

International.

Clients include

publishing

houses, public

universities,

etc.

E-

Publishing,

digitization

and content

management

(domestic

and

international

clients), field

research and

product

marketing.

DDD operates its

delivery center

out of Nairobi,

employing

youths hailing

from urban

slums,

economically

weaker sections,

etc. and some of

who are pursuing

college degrees

along with their

full-time jobs.

Size-200; Age- 7

years

As for financing, some ISSPs relied on either local funding sources or global

supporters like the Rockefeller Foundation, which helped defray initial investments

and employee training. Most ISSPs in our sample identified as market-based social

57

enterprises and earned revenue from their IS operations. Table 4 shows that ISSPs in

our sample were mostly young (<5 years old at the time of interview) and small (<200

employees) to medium size (<500 employees), and operated from a single or few

locations. Four providers were larger (>500 employees) and operated in multiple

centers across rural or urban locations. Aside from these properties, ISSPs in our

sample differed in terms of the types and geographic location of clients, the

community setting from which they provide services, growth orientation, and

entrepreneurial aspirations. These are the core variables in our analysis.

Figure 3 Relationships of ISSPs within the Global Services Outsourcing Industry

Location of Business Clients

One important differentiating factor in ISSP growth orientations was the

location of clients. We identified two major groups of ISSPs: (1) those predominantly

serving a few selected domestic clients (often as sub-contractors), and (2) those

serving predominantly a variety of mostly international end clients as main providers.

58

In the first group, six ISSPs focused on serving a limited number of primarily

domestic clients; three worked as subcontractors for mainstream providers typically

located in the same country. One example is Cayuse Technologies, an ISSP

specialized in training and hiring Native Americans. Its main client is Accenture, to

which Cayuse offers IT infrastructure and application services, and Accenture is

involved in training. One major characteristic of client relationships in this group is

that clients are aware of and support the ISSP's social mission. Our findings suggest

that having clients in the same country or location as ISSPs’ operate in, plays an

important role in supporting the social mission, as co-location prompts clients and

ISSPs to share similar institutional and cultural contexts. The following quote from

the CEO of Cayuse Technologies demonstrates this:

“Our clients want to see the rural communities thrive and be successful. […]

you can have good quality work done and not be in a big city. And our clients

really like the story…. Some of them care a lot… We have some that say, “it’s

not about the cost” and that “we want to be with you.” (CEO, Cayuse

Technologies, USA).

These clients and ISSPs often developed deep, long-term relationships

committed to the services delivered and social mission served. This model appeared

to work well when ISSPs operated as subcontractors, which limited their services to a

range that suited the skills and limitations of beneficiary employees. These ISSPs are

also shielded from acquiring and managing end clients that can be demanding of

service quality and price independent of any social mission.

In the second major group, ISSPs served a range of international (and

domestic) end clients. These ISSPs were exposed to the same client expectations as

59

mainstream service providers and were responsible for client acquisition and service

delivery. The proportion of non-beneficiary employees was higher in this group

because clients expected ISSPs to hire non-beneficiary employees to ‘compensate' for

the limitations of beneficiary employees.

In contrast to domestic clients, international clients were often neither aware

of nor necessarily support the social mission of ISSPs. This appears mainly because of

the geographic and institutional distance between client and ISSP, a lack of shared

understanding of social needs, and a lack of consumer or stakeholder pressure on

clients to pay attention to economic and social conditions of their service providers.

Clients of these ISSPs perceive them and mainstream service providers as direct

competitors. Client relationships tend to be transactional – focusing on service quality

and cost. The following quote from an Indian ISSP illustrates this point:

“The social cause is a mission for us, not for our clients; to the clients we are

… very cost effective and price wise competitive.” (Manager, Vindhya

Infotech, India).

Community Settings

Another differentiating factor is the location from which ISSPs operate and

maintain community relationships. Community settings have the parallel ‘functions'

of being the location of beneficiaries and the business environment. As for the

business environment, ISSPs gain access to underutilized resources, such as labor and

funding, and access to clients. We identified two major groups: (1) ISSPs operating

from rural and undeveloped settings, and (2) ISSPs operating from urban and

developed locations. The choice of location had significant impacts on ISSP growth

orientations.

60

Six ISSPs in our sample primarily operated from rural settings, meaning

regions with a relatively low population density that depend mainly on agriculture and

other subsistence activities for livelihood. Lacity et al., (2012) call these rural ISSPs

‘rural sourcing providers'. Owing to the rural location, which often accompanied

lacking education and employment opportunities, access to sufficient livelihoods was

problematic. By operating in rural settings, ISSPs enhance livelihoods for employees,

while allowing them access to underutilized labor pools. Typically, however, rural

ISSPs operated at a limited scale and served a small number of clients. Again, Cayuse

is a good example, whose major client is the mainstream provider Accenture.

Entrepreneurs established ISSPs in rural settings for multiple reasons: Prior

experience or exposure to these communities, perhaps through their own childhood,

may prompt them to choose a particular location (Kannothra and Manning, 2015).

Recognizing an untapped workforce may also play a role, such as one entrepreneur

who started a rural Indian ISSP who mentioned that recognizing a business

opportunity initially prompted him to open an outsourcing business in his village. The

local population spoke fluently in multiple Indian languages due to their location, and

this prompted the idea of a call center supporting regional clients:

“One of my friends told me [of] an opportunity from state government; that

they are going to fund rural BPOs… I thought …I'll start a small company in

a rural place and then maybe in future I'll have a corporate office in

Bangalore. We are located at the border of Karnataka and Maharashtra. We

have an advantage. We can process Hindi forms, we can process Kannada

forms, and we can process Marathi forms." (Founder, OTRA, India).

61

Rural ISSPs almost exclusively worked with dedicated community partners

who helped them train and recruit often difficult-to-access beneficiary employees

become intermediaries for addressing broader community needs. For example,

Cayuse engaged in regular exchanges with community partners and leaders to discuss

matters of good governance as well as skills and training requirements.

In contrast, five ISSPs mainly operated from urban settings. Urban ISSPs

benefitted from more developed infrastructure, easier client access, but typically also

tougher competition. Many urban ISSPs shared features of geographic clusters

(Porter, 2000) in having a concentration of both ISSPs and regular outsourcing service

providers competing for clients. Unlike rural settings, urban areas had a segmented

working population, where the educated urban elite enjoyed a range of employment

opportunities, and people living in urban slums, disabled people or minorities

struggled to find work. Urban ISSPs served the latter populations to effect inclusive

employment.

In relation to community and client relations, urban ISSPs worked with a

larger variety of partners, hired through multiple channels, and collaborated with local

universities and training institutes by engaging in joint training or offering internships.

Craft Silicon, an urban ISSP in Nairobi, Kenya, trains and employs youth from

Nairobi’s largest slum and recruits from the non-beneficiary urban market to meet

client needs. As for client relations, unlike rural ISSPs, urban ISSPs often develop

relations with multiple diverse domestic and international clients due to easier access

to client markets; though this is accompanied by stronger competition for clients.

In sum, we find that most ISSPs in our sample fall into two major groups. The

first group serves mainly local or domestic clients and typically operates in less

62

developed rural areas. The second group serves a more diverse clientele, including

international clients, and typically operates in urban areas. Next, we elaborate how

these conditions affect the way ISSPs approach growth, and how entrepreneurial

aspiration affects growth orientations.

Growth Orientations: Community-focused vs. Client-focused

ISSPs in our sample differed in their growth orientation. Growth orientation

included the approach to growth and ways of managing client and community

relations and related tensions, and was influenced by structural conditions and

informed by entrepreneurial aspirations. We found ISSPs to pursue one of two

approaches: community-focused or client-focused growth. Table 5 gives an overview

of core features and differences in client and community relations and the way ISSPs

manage social-business tensions with each orientation.

Table 5 Comparison of Community-focused and Client-focused Growth Orientation

Dimension Community-focused Growth Client-focused Growth

Definition Growth orientation that is typically

orchestrated with needs and

constraints of established, highly

integrated community and client

relationships; growth pace is slow.

Growth orientation that is driven

by pressure / aspirations to expand

client base while managing

community relationships

independently; growth pace is fast.

Client base Deeply embedded relationships

with selected clients who are

aware of and buy into the social

mission; clients are typically co- or

near-located sharing the social and

economic environment with

hybrids; client relationships are

further supported by loyal staff

trained into client-specific

services.

Rather transactional, opportunistic

relationships with a variety of

clients who are often not aware of

nor buy into the social mission;

clients are typically international

and thus distant from hybrid

locations and do not share social

or economic environment.

63

Community

setting

Hybrid operations are typically

located in small, underdeveloped,

often rural setting; exclusive, non-

competitive resource access to the

community (e.g., labor) through

long-term alliances with

community organizations.

Beneficiary: rural communities.

Hybrid operations are typically

located in larger, more developed

urban clusters; access to multiple

recruiting/sourcing channels, and

wider market; exposure to

mainstream competition for client

projects.

Beneficiary: slums, disabled,

minorities.

Practices of

pre-

empting,

accepting

and

managing

social-

business

tensions

1. Community-centered solutions

to tensions (e.g., promote

community resources to clients

to gain client trust; integrate

clients with community

relationships to prevent client

switching).

2. Manage dependence by

diversifying services with

existing partners.

3. Switching to more client-

focused growth mode if

entrepreneurial aspiration in

conflict with the growth

orientation.

1. Client-centered solution to

tensions (e.g.,

adapt/complement community

resources with client needs;

manage community relations

independently to protect social

mission).

2. Manage competition by

professionalizing client

relations.

3. Switching to more community-

focused growth mode if

entrepreneurial aspiration in

conflict with the growth

orientation.

Limitations

of growth

orientation

Ability to exploit highly integrated

client relations, yet strong

dependence on particular clients,

which slows down or constrains

growth.

Exclusive access to underutilized

community resources, yet scale

and scope of activities limited by

local skill set.

Ability to accelerate growth

through stronger independence

from particular clients, yet

sacrificing client buy-in into the

social mission.

More flexible access to resources

(e.g., labor) on demand, yet talent

competition with mainstream

firms.

Community-focused Growth

Community-focused growth is an orientation where growth was motivated and

guided by community needs. Entrepreneurs operated for slower growth, without much

pressure from clients or other stakeholders, and emphasized maintaining and

incrementally expanding existing client relationships in support of the social mission.

64

These ISSPs were mostly younger and had integrated business and social objectives

with client and community relations. Furthermore, this approach to growth appeared

to be supported by two inter-related conditions: operation out of rural areas, and focus

on domestic clients.

ISSPs with community-focused growth orientations operated in rural

locations. Strong long-term community partners helped to recruit mostly beneficiary

employees, which benefited ISSPs and their long-term clients through high loyalty

and low attrition:

"A lot of community engagement was done during the hiring process. Our

recruitment takes longer compared to an urban team… Somebody in a

[metropolitan ISSP] gets trained and certified in one month, but our

employees take three to four months. The benefits of this were long-term: Low

cost, low attrition and they continue performing repetitive, critical but non-

core tasks for clients.” (Manager, DesiCrew, India).

Community-focused growth ISSPs usually served local or domestic rather

than international clients, because the approach develops and expands a limited

number of potentially long-term and highly integrated client relationships rather than

building a large client base. In this situation, geographic proximity of clients becomes

an important supporting condition that allows clients and ISSPs to share a common

social context. Selected clients typically supported the social mission, which also

reduced pressure on ISSPs to grow the scale or scope of operations beyond the

capacity of their beneficiary staff. The following quote illustrates the value of serving

local clients:

65

"Normally we would encourage a client to visit us - that will change their

perception... When you talk to them, you realize that they know everything

about our business, our quality of services, etc. through references. Once they

come and visit us, their response is completely different. They say “I want to

refer you to someone else too”; therefore, I get two clients instead of one,

once they come to visit us.” (Manager, Vindhya Infotech, India).

Community-focused growth builds on high involvement of clients in training

and business operations, in collaboration with community organizations who help

with recruitment. This high degree of integration creates synergies between social

mission and revenue generation; however, it may also constrain the scale or scope of

operations, and this was either accepted by the ISSP or became a source of tension, as

we discuss further below.

Client-focused Growth

The other major growth orientation ISSPs gravitated towards we called client-

focused growth, where growth was motivated and guided by client needs. Rather than

just expanding existing client relationships, this orientation aimed to expand and

diversify the client base, and grow fast. ISSPs pursuing this approach decoupled

business and social objectives, with client and community relations being managed

independently, and were generally older than community-focused ISSPs.

ISSPs pursuing client-focused growth mainly operated in urban locations and

catered to international clients. The urban business context offered better

infrastructure, which typically allowed for easier access to new clients. The urban

environment, however, also meant that competition was tougher, and clients were

likely to compare ISSPs with regular vendors, which often required ISSPs to hire

66

more non-beneficiary employees. In addition, urban ISSPs sometimes hired

international staff to facilitate growth. Crafts Silicon took this approach:

“I can’t find a person who can really drive the software company to a much

larger scale because that expertise would not be around here... So, some of the

senior positions like my CEO is from the U.S. My head of development is from

India.” (Founder, Crafts Silicon, Kenya).

Both growth orientations are potentially viable approaches to growth, based on

supportive structural conditions. However, through inductive analysis, we also found

that the orientation pursued also depends on the entrepreneurial aspirations of the

ISSP founder or CEO.

Entrepreneurial Aspirations

Entrepreneurs favor certain ways of growing over others independent of their

current client base or location. Sometimes, these aspirations concur with the current

structural set-up. For example, fast growth aspirations may be in line with urban

operations and a focus on international clients, as well as a ‘de-coupled’ approach to

pursuing business and social objectives. For example, the CEO of DDD speaks

positively of the benefits of expanding its client base, regardless of whether adding

clients may create synergies with the social mission:

“…it is our intention to be profitable because profits are the main source of

support for our mission, which involves supporting the education of people

who work for us, but also [to] the extent that we can expand the operation, we

can hire more people.” (CEO, DDD, Kenya).

Sometimes, however, entrepreneurial aspirations do not agree with the current

growth orientation. For example, CEOs of rural ISSPs often aspired a growth pace

67

and scale beyond the capacity of their rural setting and established client base. One

Indian ISSP in our sample (iMerit) started as a rural non-profit promoting skills and

IT training for youth and later formed a separate company to employ them to expand

beyond its local market and increase profitability. Entrepreneurial aspirations to break

out of local market constraints motivated iMerit to pursue international clients. The

executive of iMerit explained that “…we actively go for … companies in the U.S. that

pay a little better, that pay on time and most importantly that have a little bit of higher

billing rates.” (Executive, iMerit, India). Our analysis suggests that such situations

may become important sources of tensions and drivers for potential changes in growth

orientation. We detail the emergence and consequences of tensions next.

Emergence and Management of Tensions

Social-business tensions may remain latent until environmental factors or

cognitive efforts ‘accentuate the oppositional and relational nature of dualities’ (Smith

and Lewis, 2011). Further, each growth orientation implies certain ways of managing

tensions, contingent upon structural conditions and (as noted previously)

entrepreneurial aspirations. Actors in both growth orientations identified social—

business tensions and adopted various practices to manage them, and we explored

environmental and structural conditions that rendered the tensions salient, and ways

they were managed. One major social-business tension emerging from structural

conditions identified by interviewees surrounded the need to gain client trust while

hiring beneficiaries that may lack skills desired by clients, and we use this as an

example.

Pre-empting. To address the issue of gaining client trust while serving the social

mission, one strategy used both by client-focused growth and community-focused

68

growth firms was what we call ‘pre-empting’, where pilot projects were used to dispel

any concerns about their ability to execute successful projects: “They [clients] come

and see our centers before they sign up... we might start with a pilot project... And

once this project is going well, they would scale up.” (Executive, Rural Shores,

India). Another practice that pre-empted and dispelled client concerns was training

and certifying employees using a third-party agency. Community-focused firms also

recruited experienced leaders to pre-empt social—business tensions: "We continue to

look for people with the right business skills, but we also look out for people who have

the inclination to go out and make a difference in the world." (CEO, B2R, India). This

pre-empting of tension also manifested in the way both client-focused and

community-focused firms pre-selected clients. In some cases, funding organizations

signed up as the first clients. Community-focused organizations matched clients with

beneficiary capabilities rather than modifying capabilities based on client needs: “We

needed more patient customers, and we managed to get a few of them” (CEO, B2R,

India). Client-focused firms recruited non-beneficiary employees from outside the

community to satisfy client needs.

Accepting and managing. Another practice that addressed client trust while serving

the social mission was to accept the paradoxical social—business tension (Smith and

Lewis, 2011) while also managing stakeholder perceptions and expectations. In this

instance, ISSPs developed community-centered or client-centered solutions according

to with their orientation. For example, community-focused ISSPs like Cayuse

Technologies (USA) promoted the skills of beneficiary employees: "I put together an

overview of our capabilities and our skills and diversities mix…” (CEO, Cayuse

69

Technologies, USA), while client-focused ISSPs, such as iMerit, emphasized

professionalism and initially downplayed the social mission:

"Our goal is to look like a professional organization… After a successful

delivery, we tell our clients, ‘oh, by the way, check out our website. Some of

the young men and women that we work with are from disadvantaged

backgrounds'." (Executive, iMerit, India).

In these instances, community-focused ISSPs managed client expectations by

educating them about beneficiaries, while client-focused organizations addressed

client needs by expanding capabilities. Client-focused organizations managed client

perceptions towards mainstream capabilities (suggesting they are competitive with

mainstream service providers), while community-focused organizations managed

perceptions towards niche services that also created social value.

Further influence of entrepreneurial aspirations. Finally, in addition to these two

accepting and managing and pre-empting practices, we found that entrepreneurial

aspirations not only play a role in which growth orientation entrepreneurs pursue (as

detailed above), but are also influence whether tensions are deemed salient. Tension

may not be apparent to entrepreneurs if their aspirations concur with the current

growth path. For example, although client-focused growth may imply diminishing

potential for synergies between social and business goals, entrepreneurs may not

perceive it to be a problem, as demonstrated by an executive of iMerit:

“We are in no way an NGO or a charitable organization. We are a typical

commercial organization, and we are trying to show to the world that even

with these employees we can run a profitable organization. We are doing

business with a profit motive. At the same time, we are also engaged in

70

“philanthropy” by employing and creating opportunities for these

(disadvantaged) people” (Executive, iMerit, India).

Conversely, where entrepreneurial aspirations are not aligned with current

growth conditions, tensions are perceived more strongly. Entrepreneurs with high

growth aspirations perceived dependence on specific clients and specialized

capabilities as a problem of focusing on the community, and in response some favored

incremental approaches. For example, the CEO of Cayuse Technologies tried adding

services to promote growth and keep Accenture from switching providers; favoring a

solution in line with Cayuse’s integrated community-focused approach:

"We… have a teaming agreement between Accenture and Cayuse

Technologies directly. So, each of the contracts that we do, there is some

involvement from Accenture; but they have no influence over our daily

operations or processes. Who we hire or how much we compensate or any

other decisions, they don't have any influence." (CEO, Cayuse Technologies,

USA).

By comparison, the founder of B2R, a rural ISSP, considered shifting from

being community-focused to becoming more client-focused by expanding the client

base to become less dependent on particular clients: “We want to make sure that the

conscious effort is there to continue to grow… we work closely with large BPOs and

not be dependent only on them.” (Founder, B2R, India).

In sum, tensions experienced, often in conjunction with growth aspirations of

entrepreneurs that are not in line with growth conditions, drive entrepreneurial action.

Changing growth orientation may provide a partial solution to a given tension, yet

71

each growth orientation also implies new tensions which need to be continuously

managed.

Discussion: Hybrid Growth Orientations and Tensions in Global Supply Chains

This study responds to a significant gap in our understanding of hybrid growth

and management of its related tensions. Specifically, we looked at how the dual

embeddedness of hybrids in local community and GSCs affect their approaches to

growth and ways of managing social—business tensions. To date, research has

focused on identifying the presence of tensions when growing (Battilana and Lee,

2014; Pache and Santos, 2013) and whether hybrids choose to grow or not (Battilana

& Dorado, 2010; Haigh & Hoffman, 2014; Lumpkin et al., 2013; Weerawardena &

Mort, 2006). Our examination of ISSPs extends this research by identifying two major

growth orientations that help hybrids manage tensions in GSCs.

The two orientations we have identified – ‘community-focused’ and ‘client-

focused’ growth – are summarized in Table 5. Based on the case of ISSPs, we have

identified key properties of each approach, including practices of managing tensions,

as well as facilitating and moderating factors. Figure 4 lays out the overall theoretical

model. Community-focused growth denotes an approach that orchestrates slower

growth with needs and constraints of selective, highly integrated community and

client relationships. This approach favors the expansion of long-term client

relationships over expanding the client base. Client-focused growth seeks faster

growth, driven by pressure and aspirations to expand the client base while managing

social missions independently. This approach favors greater flexibility and

independence while sacrificing client buy-in into the social mission and exposing

hybrids to mainstream competition.

72

Each growth orientation is both enabled and constrained by structural

conditions. First, we find that growth orientations are conditioned by the kind of

settings in which hybrids operate and maintain community relations (see Table 5).

Hybrids seem likely to pursue community-focused growth when they operate out of

smaller, rural, less developed community settings. Through alliances with community

partners, hybrids enjoy exclusive access to resources in these communities, such as

underutilized labor, while simultaneously benefitting communities by generating

income and making the local population more employable (see also Rivera-Santos et

al., 2015; Prahalad and Hammond, 2002; Prahalad 2012; London et al., 2010).

Mainstream competition is low since access to community resources is exclusive. Yet,

access to clients is often limited. By comparison, hybrids pursue client-focused

growth mainly out of larger, more developed urban settings, which provide easier

access to domestic and international clients and other resources but expose hybrids to

stronger mainstream competition for clients and resources.

Second, our findings suggest that hybrid growth orientations are strongly

influenced by the types of business clients served (see Table 5). Community-focused

growth is supported by a client base that is mostly local or domestic. Proximity or

even co-location of clients with hybrids makes it more likely that clients (and their

stakeholders) share the same economic and social environment with hybrid suppliers,

and often share their social cause. By contrast, client-focused growth typically

matches a more diverse, international client base. Being more geographically and

institutionally distant from providers, clients may not be aware of nor buy into the

social mission, and hybrids may compete based on professionalism, thereby entering

more transactional client relationships.

73

Figure 4 Hybrid Growth Orientations in Global Supply Chains

Third, we find that entrepreneurial aspirations can either support or conflict

with current growth orientations. Entrepreneurs operating community-focused ISSPs

generally preferred slow growth in view of community needs and constraints;

74

prompting them to invest in existing community and client relations. Likewise,

entrepreneurs operating client-focused ISSPs from urban areas preferred fast growth

and invested in their capacity to compete with mainstream suppliers. Where

entrepreneurial aspirations conflict with given structural conditions, entrepreneurs

may shift to a different growth orientation; typically, in this situation hybrids moved

from a community-focused to client-focused growth orientation when they aspired to

faster growth.

Importantly, our findings suggest that each growth orientation has implications

for how tensions between commercial and social goals are managed (see Figure 4).

Approaches to managing tensions thus become part of the growth orientation itself.

One key management practice we identified is ‘pre-empting,' where entrepreneurs

anticipate tensions before they arise, and manage them proactively by configuring

operations, client acquisition, hiring and training in ways that aim to reduce the

impact of tension on operations. We also identified instances where hybrids concurred

with Smith and Lewis (2011) where hybrids accepted the tension, and regardless,

hybrids developed either community-centered or client-centered solutions according

to with their corresponding growth orientation.

Implications

Implications for Future Research

The foremost contribution of our study is in providing a more contextual

understanding of how paradoxical tensions are perceived and managed in hybrids

specifically (Battilana and Lee, 2014; Smith et al., 2013) and organizations in general

(Pache and Santos, 2010; Smith and Tushman, 2005; Oliver, 1991). We follow the

notion from paradox theory (Smith and Lewis, 2011) that paradoxical tensions, such

75

as social-business tensions, can never be resolved completely, but remain an ongoing

concern for entrepreneurs (Smith et al., 2013). Based on this notion, we contribute to

a more relational and contextual understanding of paradox dynamics (Schad et al.,

2016) in three main ways: (1) by identifying growth orientations as an important

driver for how paradoxes are perceived and managed; (2) by specifying divergence of

entrepreneurial aspiration and organizational configuration as a critical driver of

making tensions manifest; and (3) by introducing the importance of geographic

embeddedness in paradox dynamics.

First, we have shown how pursuing certain growth orientations – here: client-

focused and community-focused growth – influence how tensions are perceived and

managed. Prior research suggests that fast-past growth may result in ‘mission drift’

and ‘increased tension’ (Andre and Pache, 2016; Clifford et al., 2013; Pache and

Santos, 2010), and that staying small and ‘local’ may prevent this drift (Kistruck and

Beamish, 2010; Maak & Stoetter, 2012; Mair et al., 2012; Montgomery et al., 2012).

Our findings indicate that neither slower-paced community-focused growth nor faster-

paced client-focused growth is tension-free. Rather, each orientation is associated

with different ways that tensions are perceived and managed, and therefore managing

(and perceiving) tensions happen in a certain strategic frame. In our case, community-

focused growth aligns with community-centered ways of managing social-business

tensions. This may lower ‘perceived tensions' within that frame, but it does not

eradicate the latent social—business tension entirely. For example, whereas

dependence on selected clients may not be perceived as a source of tension in a

community-focused frame, it may be in a client-focused frame. Similarly, whereas

‘de-coupling' of business operations and social missions might be seen as

76

‘problematic' in a community-focused frame, it is considered a feasible ‘coping

practice' (Battilana and Lee, 2014; Pache and Santos, 2013) in a more client-focused

frame. In other words, strategic frames – here: of approaching growth – influence the

extent to which tensions are ‘accepted' and/or ‘accommodated,' and thus contextualize

what Smith and Lewis (2011) call the ‘equilibrium model of organizing.' We thus

encourage future studies to pay more attention to strategic frames in studying

paradoxes.

Second, we show that divergence between entrepreneurial aspirations and

organizational configuration can be an important driver of paradox dynamics. Smith

and Lewis (2011) argue that individual managerial orientations are critical in making

latent tensions ‘salient' and in triggering either ‘vicious' or ‘virtuous' cycles of

addressing these tensions (see also Schad et al., 2016). Relatedly, Hahn et al. (2016)

point out that differences between individual and organizational goals can create

tension. Our study helps specify this notion by suggesting that divergence between

entrepreneurial growth aspirations and the organizational set up of hybrids may re-

activate cycles of perceiving and managing social-business tensions. In particular, we

find that entrepreneurs may develop a preference for faster client-focused growth

(available in urban locations) when their organizational set-up (a rural location) favors

slower community-focused growth. In that situation, certain latent ‘constraints' that

were accepted in community-focused growth (e.g., limited number of clients), become

more salient and ‘less acceptable.' This may drive new processes of accommodation,

such as establishing operations in urban areas to access new clients. Our findings thus

stress the importance of not only analyzing individual awareness (Jay, 2013), and

alignment between individual and organizational goals (Hahn et al., 2016), but also

77

alignment between entrepreneurial or managerial aspirations and current structural

conditions in understanding the management of paradoxes.

Third, we introduce the importance of geographic embeddedness to paradox

dynamics. To our knowledge, geographic context is an important omitted variable in

studies of tensions and paradoxes (see, e.g., Schad et al., 2016 for a current review).

While the importance of local communities and contexts to how hybrids manage

social and business objectives is known (Hoffman et al., 2012; Kistruck & Beamish,

2010; Maak & Stoetter, 2012; Montgomery et al. 2012), conducting our study in the

context of GSCs suggests that a more sophisticated approach is required that

incorporates geography into the analysis of paradoxes and tensions. We find that

tensions surrounding stakeholder expectations may increase with geographic distance.

Specifically, the geographic proximity between hybrids and their clients may lower

social-business tensions by creating a shared awareness of the social context and

mission. Conversely, stakeholders at a distance are exposed to different,

geographically bounded, frames of reference. In particular, our results suggest that the

rural vs. urban divide has important implications for how hybrids manage social-

business tensions because it affects the degree to which latent tensions become

salient, and affects the level of awareness of certain tensions by individual

entrepreneurs. We thus propose a ‘spatial turn' in the analysis of paradox dynamics

that situates paradoxical tensions and management strategies in geographic contexts.

Relating to geographic embeddedness, we contribute to a better understanding

of GSCs as an important context for hybrid strategies and growth by examining the

interplay of local community and global client relations. Prior research on hybrids has

argued that their effectiveness often stems from creating synergies between business

78

and social goals by embedding in local communities (Kistruck & Beamish, 2010;

Maak & Stoetter, 2012; Mair et al., 2012; Montgomery et al., 2012), whereas growth

beyond particular local contexts may endanger the hybrid model (Haigh and Hoffman,

2012). We challenge that perspective by showing that the benefits (and constraints) of

local contexts may differ depending on the type of context. Whereas rural settings

seem to provide synergies through exclusive access to resources, reduced competition

and strong ties with beneficiary groups, this is less the case in urban environments.

Urban environments may ease access to certain resources but also increase

competition that may challenge the pursuit of hybrid models. We thus recommend

that future research on hybrids take a more nuanced perspective on ‘local

communities.'

More broadly, we show that the nature of client relationships has a profound

impact on hybrid strategies. Whereas in some sectors, such as consumer goods, the

customers may also be beneficiaries (Lee and Battilana, 2013; Prahalad and

Hammond, 2002; Prahalad 2012; London et al., 2010), this is often not the case in

business-to-business contexts. Knowing that growth orientation is affected by

geographic (and institutional) distance to clients and its influence on whether clients

are aware and supportive of the social mission indicates that future research could

take the intersection of client relationships and geographic distance more seriously.

Whereas in some industries, such as coffee production, the distance problem may be

‘overcome’ through transnational social standards like Fairtrade, and consumers who

pressure firms to account for social responsibility (Kolk, 2005; Manning et al., 2012),

this might not be the case in other industries. In our study, hybrid suppliers opted to

79

separate their business strategy from their social mission to protect their reputation

with clients.

Implications for Practice

Further to our theoretical contributions, our findings underscore the arrival of

social responsibility as a managerial concern in global business-to-business sectors

and have important implications for understanding the growing role of hybrid models

in global outsourcing. Other studies indicate that the influence of hybrids in many

sectors is growing as regions alter legislation to include legal structures that

institutionalize a social mission (Haigh et al., 2015a). The aggregate result of this

growth is the alteration of expectations about sustainable practices across sectors,

including outsourcing. Carmel et al. (2014) highlighted the need to study the effects

of outsourcing on local communities, and the 2012 International Association of

Outsourcing Professionals (IAOP, 2012) survey report argued that social

responsibility is increasingly important in outsourcing contracts. Encouragingly,

Babin and Nicholson (2010) noted that outsourcing clients and providers are working

towards social and environmental sustainability in their relationships and operations.

With their strategies designed around alleviating employment inequality, ISSPs

appear as an important protagonist enhancing socially responsible practices among the

outsourcing sector.

Going forward, it will be interesting to examine how the trend of hybrid

models in global outsourcing will interrelate with other established trends such as

transnational social and sustainability standards like Fairtrade. Unlike Fairtrade,

whose development was mainly driven by consumers in advanced economies

(Reinecke et al. 2012; Manning et al., 2012), IS has been driven predominantly by

80

local initiatives in developing countries. Both approaches of integrating social

responsibility into business models seem to have opposing strengths and weaknesses:

Fairtrade has become a scalable, yet somewhat rigid and costly solution for producers,

whereas IS is a flexible, firm-specific practice, yet with potentially limited scalability

across supplier populations. Future research is invited to examine the comparative

strategic advantages of adopting transnational standards vs. firm-specific hybrid

models for suppliers in global value chains.

Finally, given the growing need for increased social responsibility among

outsourcing companies, our findings have important implications for outsourcing

practice. In particular, ISSPs in our sample pursuing client-focused growth

demonstrate it is possible to undertake significant social responsibility initiatives

while maintaining the identity and growth patterns of a traditional company. Studies

have shown ways that traditional companies engage with hybrids as competitors and

acquisition targets (Haigh & Hoffman, 2012; Lee & Jay, 2015), and have discussed

ways that companies can adopt hybrid qualities to push their corporate social

responsibility practices forward (Haigh et al., 2015a). Outsourcing companies can

take from our results knowledge that it is feasible to make operational changes - such

as employing people from disadvantaged populations to fulfil specific roles within the

firm - that will have significant positive impacts on their community, and there is a

choice as to whether the practice becomes part of the firm’s identity or not.

Conclusion

This study has elaborated how hybrids operating in GSCs manage paradoxical

social-business tensions. Based on the case of ISSPs hiring and training of

disadvantaged populations to provide services to business clients, we identified two

81

major growth orientations – ‘community-focused growth’ and ‘client-focused growth’

– which imply different ways of growing (slow/in line with community needs vs.

fast/in line with client needs, respectively) as well as different ways of managing

tension; specifically the tension between business client expectations (low-cost, high-

quality services) and local community demands (providing training and hiring

opportunities for disadvantaged staff in those communities).

In response to Schad et al., (2016), we contribute to the paradox literature a

more contextualized and relational understanding of paradox dynamics; yet one that

remains holistic and avoids reductionism. The two growth orientations we specify

encapsulate important drivers for how paradoxes manifest are perceived and

managed. We introduce ‘pre-empting' as a management practice that anticipates and

manages tension, and the importance of geographic embeddedness and distance to the

paradox literature, and specify how diverging entrepreneurial aspirations and

organizational configurations causes tensions to manifest. Further, we introduce the

importance of geographic embeddedness in paradox dynamics and suggest avenues of

future research to explore these contributions further.

82

References

Accenture. (2012). Exploring the Value Proposition for Impact Sourcing. Rockefeller

Foundation.

Alter, K. (2007). Social Enterprise Typology. Seattle, WA: Virtue Ventures LLC.

André, K., & Pache, A. C. (2016). From caring entrepreneur to caring enterprise:

Addressing the ethical challenges of scaling up social enterprises. Journal of

Business Ethics 133(4), 659-675.

Aurini, J. (2006). Crafting legitimation projects: An institutional analysis of private

education businesses. Sociological Forum 21(1), 83-111.

Avasant. (2012). Incentives & Opportunities for Scaling the “Impact Sourcing”

Sector. Rockefeller Foundation.

Babin, R., & Nicholson, B. (2010). Sustainability Practices in Global IT Outsourcing,

Manchester Business School Working Paper Series. Manchester, England: The

University of Manchester.



Journal 53(6), 1419-1440.


from the study of social enterprises. The Academy of Management Annals

8(1), 397-441.



enterprises. Academy of Management Journal 58(6), 1658-1685.

Battiliana, J., Lee, M., Walker, J., & Dorsey, C. (2012). In search of the hybrid ideal.

Stanford Social Innovation Review 10(3), 50-55.

Billis, D. (Ed.). (2010). Hybrid Organizations and the Third Sector: Challenges for

Practice, Theory and Policy. New York: Palgrave Macmillan.

Blumer, H. (1954). What is wrong with social theory? American Sociological Review,

3-10.

Boyd, B., Henning, N., Reyna, E., Welch, M., & Wang, D. (2009). Hybrid

organizations: New business models for environmental leadership. Greenleaf

Publishing.

Carmel, E., Lacity, M. C., & Doty, A. (2014). The Impact of Impact Sourcing:

Framing a Research Agenda. In Information Systems Outsourcing (pp. 397-

429). Springer.

83

Clifford, J., Markey, K., & Malpani, N. (2013). Measuring Social Impact in Social

Enterprise: The state of thought and practice in the UK. E3M, London.

Corbin, J., & Strauss, A. (2008). Basics of Qualitative Research 3e. SAGE, London.


Business Review 83(6), 100-108.

Diesing, P. (1979). Patterns of discovery in the social sciences: Transaction

Publishers.

Doh, J. P. (2005). Offshore outsourcing: implications for international business and

strategic management theory and practice. Journal of Management Studies

42(3), 695-704.

Ebrahim, A., Battilana, J., & Mair, J. (2014). The governance of social enterprises:

Mission drift and accountability challenges in hybrid organizations. Research

in Organizational Behavior 34, 81-100.

Eisenhardt, K. M. (1989). Building theories from case study research. Academy of

Management Review 14(4), 532-550.


opportunities and challenges. Academy of Management Journal 50(1), 25-32.

Emirbayer, M., & Mische, A. (1998). What is agency? 1. American Journal of

Sociology 103(4), 962-1023.

Freeman, J. H., & Audia, P. G. (2006). Community ecology and the sociology of

organizations. Annual Review of Sociology, 145-169.

Friedland, R., & Alford, R. R. (1991). Bringing Society Back In: Symbols, Practices

and Institutional Contradictions. In W. W. Powell, & P. J. Dimaggio (Eds.),

The New Institutionalism in Organizational Analysis, (pp. 232-263).

Gereffi, G., Humphrey, J., & Sturgeon, T. (2005). The governance of global value

chains. Review of International Political Economy 12(1), 78-104.

Giddens, A. (1984). The constitution of society: Outline of the theory of structuration:

Univ of California Press.

Greenwood, R., & Hinings, C. R. (1993). Understanding strategic change: The

contribution of archetypes. Academy of Management Journal 36(5), 1052-

1081.

Greenwood, R., Raynard, M., Kodeih, F., Micelotta, E. R., & Lounsbury, M. (2011).

Institutional complexity and organizational responses. The Academy of

Management Annals 5(1), 317-371.

84

Gulati, R. (1995). Social structure and alliance formation patterns: A longitudinal

analysis. Administrative Science Quarterly, 619-652.

Gulati, R., & Gargiulo, M. (1999). Where do interorganizational networks come

from?. American Journal of Sociology 104(5), 1439-1493.

Hahn, T., Pinkse, J., Preuss, L., & Figge, F. (2015). Tensions in corporate

sustainability: Towards an integrative framework. Journal of Business

Ethics 127(2), 297-316.

Haigh, N., & Hoffman, A. J. (2012). Hybrid organizations: The next chapter of

sustainable business. Organizational Dynamics 41(2), 126-134.

Haigh, N., & Hoffman, A. J. (2014). The New Heretics Hybrid Organizations and the

Challenges They Present to Corporate Sustainability. Organization &

Environment 27(3), 223-241.

Haigh, N., Kennedy, E. D., & Walker, J. (2015a). Hybrid Organizations as Shape-

Shifters. California Management Review 57(3), 59-82.

Haigh, N. L., Walker, J., Bacq, S., & Kickul, J. (2015b). Hybrid Organizations:

Origins, Strategies, Impacts and Implications. California Management Review

57(3): 5-12.

Haveman, H. A., & Rao, H. (2006). Hybrid forms and the evolution of thrifts.

American Behavioral Scientist 49(7), 974-986.

Henderson, J., Dicken, P., Hess, M., Coe, N., & Yeung, H. W.-C. (2002). Global

production networks and the analysis of economic development. Review of

International Political Economy 9(3), 436-464.

Hoffman, A. J., Badiane, K. K., & Haigh, N. (2012). 'Hybrid Organizations as Agents

of Positive Social Change: Bridging the For-Profit & Non-Profit Divide.' In K.

Golden-Biddle & J. Dutton (Eds.), Using a Positive Lens to Explore Social

Change and Organizations: Building a Theoretical and Research Foundation

(pp. 131-153). Routledge, Taylor and Francis Group.

Humphrey, J., & Schmitz, H. (2002). How does insertion in global value chains affect

upgrading in industrial clusters? Regional Studies 36(9), 1017-1027.

IAOP. (2012). Does Corporate Social Responsibility matter?: International

Association of Outsourcing Professionals.


hybrid organizations. Academy of Management Journal 56(1), 137-159.

Kannothra C, Manning S. 2015. Impact Sourcing at ServImpact. Managing People,

Clients, and Growth. In: Sydow, J., Schuessler, E., Mueller-Seitz, G. (Eds.):

85

Managing Interorganizational Relationships – Debates and Cases. Palgrave

Macmillan.

Kistruck, G. M., & Beamish, P. W. (2010). The interplay of form, structure, and

embeddedness in social intrapreneurship. Entrepreneurship Theory and

Practice 34(4), 735-761.

Kolk, A. (2005). Corporate Social Responsibility in the Coffee Sector: The Dynamics

of MNC Responses and Code Development. European Management Journal

23(2), 228-236.

Kostova, T. (1999). Transnational transfer of strategic organizational practices: A

contextual perspective. Academy of Management Review 24(2), 308-324.

Lacity, M., Rottman, J., & Carmel, E. (2012). Emerging ITO and BPO markets: Rural

Sourcing and Impact Sourcing. IEEE Readynotes, IEEE Computer Society.


individuals and hybrid social ventures. Harvard Business School

Organizational Behavior Unit Working Paper(14-005).

Lee, M., & Jay, J. (2015). Strategic Responses to Hybrid Social Ventures. California



innovation&quest; The emerging global race for talent. Journal of

International Business Studies 40(6), 901-925.

Lewis, M. W. (2000). Exploring paradox: Toward a more comprehensive

guide. Academy of Management Review 25(4), 760-776.

London, T., Anupindi, R., & Sheth, S. (2010). Creating mutual value: Lessons learned

from ventures serving base of the pyramid producers. Journal of Business

Research 63(6), 582-594.

Lumpkin, G., Moss, T. W., Gras, D. M., Kato, S., & Amezcua, A. S. (2013).

Entrepreneurial processes in social contexts: how are they different, if at all?

Small Business Economics 40(3), 761-783.

Maak, T., & Stoetter, N. (2012). Social entrepreneurs as responsible

leaders:‘Fundacion paraguaya'and the case of Martin Burt. Journal of Business

Ethics 111(3), 413-430.

Mair, J., Battilana, J., & Cardenas, J. (2012). Organizing for society: A typology of

social entrepreneuring models. Journal of Business Ethics 111(3), 353-373.

Mair, J., Mayer, J., & Lutz, E. (2015). Navigating Institutional Plurality:

Organizational Governance in Hybrid Organizations. Organization Studies,

36(6), 713-739.

86

Manning, S., Lewin, A., & Massini, S. (2008). A Dynamic Perspective on Next-

Generation Offshoring: The Global Sourcing of Science and Engineering

Talent. Academy of Management Perspectives 22(3), 35-54.

Manning, S., Boons, F., Von Hagen, O., & Reinecke, J. (2012). National contexts

matter: The co-evolution of sustainability standards in global value chains.

Ecological Economics 83, 197-209.

Manning, S. (2013). New Silicon Valleys or a new species? Commoditization of

knowledge work and the rise of knowledge services clusters. Research Policy

42(2), 379-390.

Manning, S., Larsen, M. M., & Bharati, P. (2015). Global Delivery Models: The Role

of Talent, Speed and Time Zones in the Global Outsourcing Industry. Journal

of International Business Studies, Forthcoming.

Marquis, C., & Battilana, J. (2009). Acting globally but thinking locally? The

enduring influence of local communities on organizations. Research in

Organizational Behavior 29, 283-302.

Marquis, C., Lounsbury, M., & Greenwood, R. (2011). Introduction: Community as

an institutional order and a type of organizing. Communities and

Organization: Research in the Sociology of Organizations, pp. ix-xxvii.

Martin, X., Swaminathan, A., & Mitchell, W. 1998. Organizational evolution in the

interorganizational environment: Incentives and constraints on international

expansion strategy. Administrative Science Quarterly 43(3), 566–601

Massini, S., & Miozzo, M. (2012). Outsourcing and offshoring of business services:

challenges to theory, management and geography of innovation. Regional

Studies 46(9), 1219-1242.

Montgomery, A. W., Dacin, P. A., & Dacin, M. T. (2012). Collective social

entrepreneurship: Collaboratively shaping social good. Journal of Business

Ethics 111(3), 375-388.

Mudambi, R. (2008). Location, control and innovation in knowledge-intensive

industries. Journal of Economic Geography 8(5), 699-725.

Oliver, C. (1991). Strategic responses to institutional processes. Academy of


Pache, A.-C., & Santos, F. (2010). When worlds collide: The internal dynamics of

organizational responses to conflicting institutional demands. Academy of


Pache, A.-C., & Santos, F. (2013). Inside the hybrid organization: Selective coupling


Journal 56(4), 972-1001.

87



Development 30(9), 1561-1577.

Porter, M. E. (2000). Location, competition, and economic development: Local

clusters in a global economy. Economic Development Quarterly 14(1), 15-34.

Porter, M. E. (1990). The competitive advantage of notions. Harvard Business Review

68(2), 73-93.

Porter, M. E., & Kramer, M. R. (2011). Creating shared value. Harvard Business

Review 89(1/2), 62-77.

Portes, A., & Sensenbrenner, J. (1993). Embeddedness and immigration: Notes on the

social determinants of economic action. American journal of Sociology, 1320-

1350.

Pouder, R., & John, C. H. S. (1996). Hot spots and blind spots: geographical clusters

of firms and innovation. Academy of Management Review 21(4), 1192-1225.

Prahalad, C. (2012). Bottom of the Pyramid as a Source of Breakthrough Innovations.

Journal of Product Innovation Management 29(1), 6-12.

Prahalad, C. K., & Hammond, A. (2002). Serving the world's poor, profitably.

Harvard Business Review 80(9), 48-59.



Development 25(11), 1821-1837.

Reinecke, J., Manning, S., & Von Hagen, O. (2012). The emergence of a standards

market: Multiplicity of sustainability standards in the global coffee industry.

Organization Studies 33(5-6), 791-814.

Rivera-Santos, M., Holt, D., Littlewood, D., & Kolk, A. (2015). Social

entrepreneurship in sub-Saharan Africa. The Academy of Management

Perspectives 29(1), 72-91.

Rockefeller Foundation. (2011). Job Creation Through Building the Field of Impact

Sourcing. Rockefeller Foundation.

Rockefeller Foundation. (2013). Digital Jobs in Africa: Catalyzing Inclusive

Opportunities for Youth. Retrieved from Rockefeller Foundation:

https://assets.rockefellerfoundation.org/app/uploads/20131217164951/Catalyzi

ng-Inclusive-Opportunities-For-Youth.pdf

Santos, F., Pache, A. C., & Birkholz, C. (2015). Making Hybrids Work. California


https://assets.rockefellerfoundation.org/app/uploads/20131217164951/Catalyzing-Inclusive-Opportunities-For-Youth.pdf

https://assets.rockefellerfoundation.org/app/uploads/20131217164951/Catalyzing-Inclusive-Opportunities-For-Youth.pdf

88

Schad, J., Lewis, M. W., Raisch, S., & Smith, W. K. (2016). Paradox research in

management science: Looking back to move forward. Academy of

Management Annals 10(1), 5-64.



Quarterly 23(03), 407-442.


equilibrium model of organizing. Academy of Management Review 36(2),

381-403.

Smith, W. K., & Tushman, M. L. (2005). Managing strategic contradictions: A top

management model for managing innovation streams. Organization Science

16(5), 522-536.

Strauss, A., & Corbin, J. (1998). Basics of qualitative research: Procedures and

techniques for developing grounded theory. ed: Thousand Oaks, CA: Sage.

Thornton, P. H., & Ocasio, W. (1999). Institutional logics and the historical

contingency of power in organizations: Executive succession in the higher

education publishing industry, 1958-1990. American Journal of Sociology

105(3), 801-843.

Tracey, P., & Phillips, N. (2007). 'The Distinctive Challenge of Educating Social

Entrepreneurs: A Postscript and Rejoinder to the Special Issue on

Entrepreneurship Education.' Academy of Management Learning & Education

6(2), 264-271.

Uzzi, B. (1997). Social structure and competition in interfirm networks: The paradox

of embeddedness. Administrative Science Quarterly, 35-67.

Waddock, S., & McIntosh, M. (2011). Business unusual: Corporate responsibility in a

2.0 world. Business & Society Review 116(3), 303-330.

Weerawardena, J., & Mort, G. S. (2006). Investigating social entrepreneurship: A

multidimensional model. Journal of World Business 41(1), 21-35.

Yeung, H. W.-c., Liu, W., & Dicken, P. (2006). Transnational corporations and

network effects of a local manufacturing cluster in mobile telecommunications

equipment in China. World Development 34(3), 520-540.

Yin, R. K. (2008). Case Study Research: Design and Methods: Design and Methods

(Vol. 5). Sage Publications.

89

CHAPTER 3

HYBRID MODELS AS STRATEGIC OPPORTUNITY? THE GLOBAL

CHALLENGE OF BUSINESS SERVICE PROVIDERS IN AFRICA

Introduction

Prior business and development research has shown sustained interest in

‘catch-up’ processes in emerging economies (Altenburg et al., 2008; Lorenzen and

Mudambi, 2013). We understand ‘catch-up’ as the continuous interplay of national

economic policies, industry dynamics, and firm capability development towards

greater competitiveness of local firm populations within and across industries. Prior

studies have focused in particular on entrepreneurial activities as well as learning,

upgrading and innovation within firm populations in support of catch-up (Gereffi,

1999, Humphrey and Schmitz, 2002; Amiti, 2001; Bresnahan et al., 2001; Saxenian,

2005). This research has also been extended into Africa (e.g. Abdulai et al., 2012).

Yet, prior studies are quite skeptical about the ability of African businesses to ‘catch

up’ with global competition by upgrading and innovating (Africa Report, 2012).

While global cost pressure has led to a

90

concentration of production in Asia and has created barriers to catching up (Altenburg

et al., 2008), new business models that have emerged in Africa, such as mobile

payment,

have not made African businesses more competitive globally (Ozcan and Santos,

2014). As one observer from a consulting firm nicely put it: Africa has yet to find its

niche in global markets (Africa Report, 2012). In addition, a recent World Bank study

estimated that on average African firms tend to be 20–24 percent smaller than firms

from other regions and hence have a reduced potential for job creation (Iacovone et

al., 2013). Reasons for such firm level disadvantages have been attributed to lack of

infrastructure, access to finance and political competition (Harrison et al., 2014). This

seems even more challenging today, since Africa as a latecomer faces global

competition not just from Western but increasingly from other emerging economies.

At the same time, prior studies indicate that especially Sub-Saharan Africa has

been a fruitful ground for social entrepreneurship (Harris et al., 2013; Rivera-Santos

et al., 2015), bottom-of-the-pyramid strategies (Kistruck and Beamish, 2010; Kistruck

et al., 2013a), and corporate social responsibility (CSR) initiatives (Gruber and

Schlegelmilch, 2015). This is because African businesses have traditionally been

strongly embedded in local communities, supporting socially oriented projects

through innovative means, such as engaging with community groups or partnerships

across sectors, that are better able to bridge problems of poverty and social or

environmental concerns (Bitzer and Hamann, 2015). By ‘local community’ we mean

locally bounded groups of people with shared social ties, economic backgrounds,

histories, knowledge, beliefs, morals, and customs (Kepe, 1999). Perhaps more than

other regions, Sub-Saharan Africa has accumulated experience in community-oriented

91

development initiatives (Juselius et al., 2014; Simplice, 2014), involving government,

private business, NGOs and community organizations (Kolk and Lenfant, 2013). As a

result, African businesses have become very involved with development and social

agendas (London et al., 2004, 2010).

It is therefore not surprising that African firms are among the early adopters of

so-called hybrid business models (Holt and Littlewood, 2015), i.e. business models

combining profitability goals and social missions (Smith et al., 2013; Lee and

Battilana, 2014). Specifically, we focus here on what we call ‘community-based

hybrids’, i.e. hybrid organizations that not only serve local communities but also

make extensive use of community resources while serving regional or global markets

with their products and services (see also Holt and Littlewood, 2015). While prior

research has focused on the social impact of hybrid models in Africa (Rivera-Santos

et al., 2015), we know little about the business potential of hybrid models, especially

in globally distributed industries and markets. We therefore ask: under what

conditions is the adoption of hybrid models a feasible strategic opportunity for firms

that operate in Sub-Saharan Africa and serve regional and global clients?

We investigate this question in the context of the increasingly important global

business services industry, which provides various services to globally distributed

clients, such as tech support, call centers, financial services and software

development. This industry has expanded into Africa in recent years (Abbott, 2013;

Manning et al., 2015). Within this context, several African service providers have

become pioneers of the so-called impact sourcing (IS) model – hiring and training of

staff from disadvantaged groups in society for global business services (Rockefeller

Foundation, 2013; IAOP, 2014). So-called impact sourcing service providers (ISSPs)

92

are an excellent example of community-based hybrids, as they not only serve but also

‘utilize’ disadvantaged communities as resources. Based on data from inductive field

studies in Kenya and South Africa, and using an extended version of the tripod model

of strategic analysis (Peng et al., 2008, 2009), we find that while many regular

providers in Sub-Saharan Africa have struggled to stay competitive vs. players in

India, Philippines and other emerging economies, firms adopting IS have learned how

to serve niche clients – both globally and regionally. Yet, while certain local resource

conditions, such as underutilized labor markets, local community organizations, and

business ties with these organizations favor the adoption of IS models, we also find

that certain moderating factors at the industry, institutional and firm level either

promote or constrain the utility of IS vs. regular business models.

Our findings may contribute to future research in three major ways. First, we

inform the debate on catch-up processes and firm strategies in latecomer emerging

economies such as Sub-Saharan Africa (Altenburg et al., 2008; Lorenzen and

Mudambi, 2013; Hoskisson et al. 2000) by showing the utility of niche models as an

alternative to more scale-dependent low-cost production in mainstream industry

segments. We further show, based on the case of hybrids, that competitiveness of

firms from and in latecomer economies can be strongly linked to their embeddedness

in local communities. However, leveraging such linkages requires both institutional

and firm-level openness to using community resources and serving niche markets

rather than more scale-dependent mainstream markets. Second, we add to the debate

on hybrid models (Lee and Battilana, 2014) by promoting a more context-sensitive

understanding of their feasible adoption. In particular, we discuss how certain

industry conditions may lower the need to scale up hybrids to make them competitive

93

and impactful and instead allow heterogeneous populations of smaller-scale hybrids to

emerge. Third, we extend prior research on global business services (e.g. Manning et

al., 2015) by discussing impact sourcing as a new strategy of local adaptation and

differentiation in a highly competitive market.

Next, we discuss Africa’s latecomer challenge and the potential of hybrid

models. We then introduce the context of global business services along with the

model of impact sourcing. This is followed by an analysis of the adoption of impact

sourcing in Kenya and South Africa. Findings are then discussed and implications are

formulated for future research.

Africa’s Latecomer Challenge: The Potential of Hybrid Models

International business and development scholars continue to take an interest in

so-called ‘catch-up processes’ (Humphrey and Schmitz, 2002; Altenburg et al., 2008;

Lorenzen and Mudambi, 2013). This is particularly relevant for Africa, which is

widely regarded as a latecomer economy (Abdulai et al., 2012), and which faces

competition from both advanced and other emerging economies. In general, we

understand ‘catch-up’ as a multi-level process of economic policy, industrial

dynamics and firm capability development enabling firm populations to capture a

growing segment of established world markets, move into higher-value production

and services, and/or establish new competitive businesses (see also Mudambi, 2008;

Humphrey and Schmitz, 2002). In line with this notion, we focus here on the growing

capacity of firm populations within particular industries in African countries to attract

regional and global clients, and compete with global peers.

94

‘Catch-up’ is typically associated with a gradual process of upgrading from

low-cost to higher-value production (Gereffi, 1999; Humphrey and Schmitz, 2002).

Yet, with increasing globalization of production, many regions, e.g. Latin America,

have been unable to compete especially with China’s large-scale manufacturing base

(e.g. Morreira, 2006). Facing this pressure, some regions have managed to catch up

through ‘technological leapfrogging’ (Amiti, 2001), learning from foreign firms

(Altenburg et al., 2008) and utilizing diaspora networks (Bresnahan et al., 2001;

Saxenian, 2005). One successful example of the latter is the software industry and IT-

enabled service sector in India (Arora et al., 2001; Ethiraj et al., 2005; Athreye, 2005).

By contrast, Africa, in particular Sub-Saharan Africa, has not benefited much

from upgrading, leapfrogging or diaspora networks. Traditionally, it has attracted

investment mainly in mining and exploitation of natural resources, such as cocoa (see

Glin et al., 2015). Compared to that, the share of African economies in global

production of goods and services is still incredibly small, even if, with rising wages in

Asia, Africa has attracted more attention as a potential location for manufacturing and

services recently (Page, 2012). Yet, many attempts to promote and develop new

industries in Africa have been challenged by political instability, corruption,

infrastructure deficits, and lack of institutional support (Prahalad and Hammond,

2002, London et al., 2010). One overarching problem with setting up businesses in

sub-Saharan Africa – aside from mining and natural resources – has been the lack of

distinctive location advantages (Africa Report, 2012).

Conversely, we argue that Africa has an underutilized potential of capitalizing

on ‘hybrid business models’, specifically ‘community-based hybrids’. These are

organizations that combine profitability goals with social missions (Jay, 2013; Porter

95

and Kramer, 2011; Haigh and Hoffman, 2014), and that not only serve local

communities but also make extensive use of community resources in serving regional

and global markets with their products and services (see also Holt and Littlewood,

2015). One example is Cookswell, based in Kenya, which markets, produces, and

sells charcoal wood-fueled stoves using local communication and distribution

networks to reach NGOs and informal networks, while also scaling to both regional

and international distribution (Holt and Littlewood, 2015). Other examples include

community-based producers of consumer goods with ecological or social impact, such

as eco-friendly bamboo bikes out of Ghana (Senthilingam and Hoeferlin, 2015) and

rollable water containers in South Africa (Qdrum, 2016).

In general, hybrid models have been described as an increasingly important

organizational form (Haveman and Rao, 2006, Haigh and Hoffman, 2012, Pache and

Santos, 2013), as they help address social issues when state and philanthropic

approaches are limited in their ability to do so (Kickul and Lyons, 2012). Whereas

hybrid models have gained importance across geographies in recent years, sub-

Saharan Africa was in fact an early-adopter economy, especially for community-

based hybrids (see e.g. Holt and Littlewood 2015). There are three main reasons for

that: First, African businesses have been rather strongly embedded in local

communities, which has enabled entrepreneurs to tap into informal networks,

capitalize on inexpensive labor and freely available resources, such as community

knowledge (Holt and Littlewood, 2015; Linna, 2012). Second, sub-Saharan Africa has

long been an experimental field for social entrepreneurship (Harris et al., 2013a,

2013b; Kistruck & Beamish, 2010; Rivera-Santos et al., 2015), bottom-of-the-

pyramid (BoP) models (Kistruck et al., 2013a; Prahalad and Hammond, 2002;

96

Prahalad 2012; London et al., 2010), and corporate social responsibility (CSR)

initiatives (Gruber and Schlegelmilch, 2015). Third, sub-Saharan Africa has been a

major receiver of foreign aid and development funds, which has further benefited

community-based businesses and prompted foreign businesses to engage in BoP

models and extensive CSR initiatives in the African context (London et al. 2010). In

combination, these dynamics have for example fueled initiatives to better embed

mining into local communities thus benefiting economic development (Harris et al.,

2013; Hilson 2014, Childs, 2012, 2014), and preventing violations of human rights

and environmental degradation (Jønsson and Bryceson, 2009).

However, whereas the social impact of hybrid models, e.g. in the context of

BoP, has been addressed in many studies (Kistruck and Beamish, 2010), we know

relatively little about the strategic potential of adopting hybrid models compared to

more regular business models. We focus in particular on community-based hybrids

serving regional and global business-to-business markets. Specifically, we now

introduce the empirical case of impact sourcing as a hybrid model in the global

business services industry. Using Peng’s Tripod Model, we further propose a multi-

level comparative analysis to evaluate the potential of hybrid vs. regular models in

Africa.

Analyzing the Potential of Hybrid Models: The Case of Impact Sourcing

To better understand the strategic potential of hybrid models in Africa we

focus in our study on an industry – global business services – that has received

increasing attention in recent years as a potential driver of employment and economic

development in many emerging economies (Manning, 2013), including Africa

(Abbott, 2013). Importantly, African countries have gained experience in recent years

97

with promoting both regular and hybrid firms in global business services (Abbott

2013; Lacity et al., 2012), which makes this industry particularly interesting to study.

The regular global business services industry is a growing industry with a

world market size of currently $150 Billion according to the industry association

NASSCOM (2015). Facilitated by digitization and commoditization of business

processes (Davenport, 2005; Apte and Mason, 1995), and driven by cost, speed,

access to talent and other strategic advantages (Doh, 2005; Manning et al., 2008;

Kenney et al., 2009), client firms in particular from advanced economies increasingly

outsource business processes, such as IT infrastructure, payroll, tech support, call

centers, and knowledge work, to specialized providers operating in particular in

developing countries (Ethiraj et al., 2005; Athreye, 2005; Sako, 2006). Providers

include large players such as U.S.-based Accenture, IBM, and HP; and India-based

Infosys, TCS, and Wipro; and many small and midsize providers around the world.

Many of them today operate from locations around the world (Manning et al., 2015).

Whereas in the 1990s and early 2000s, India dominated the global services

market (Dossani and Kenney, 2007), in recent years, more and more countries and

regions have begun to develop service capabilities catering to global client demand

(Manning, 2013), including Africa (Abbott, 2013). Drivers include: increasing

commoditization of services; growing client interest in alternative locations to avoid

hotspots; and internationalization of service providers (Manning et al., 2015). Also,

many governments in emerging economies have increased efforts to use this industry

to boost employment and economic development (GlobalServices, 2008; Manning,

2013), following the example of India (Bresnahan et. al., 2001; Reddy, 1997;

Patibandla and Petersen, 2002).

98

In Africa, in particular Egypt, Morocco, Kenya, Tunisia, Mauritius and South

Africa, have recently entered the global business services sector (Abbott, 2013;

Abdulai and Junghoon, 2012). Yet, despite early surprise successes, studies suggest

that business services from Africa can hardly compete with established players, such

as India and Philippines (Africa Report, 2012). Observers have noted that aside from

a few exceptions (e.g. Morocco), most African countries lack competitive advantages

compared to established outsourcing destinations (The Africa Report, 2012). In a

maturing industry, the latter boast scale, cost and skill advantages. Aside from time

zone proximity to Europe and some specific language capabilities, such as French and

Spanish in Morocco, African providers have struggled to carve a distinctive niche. For

example, the Kenyan BPO sector shrank from initially 45 firms in 2007 to 9 firms in

2012 (The Africa Report, 2012). Part of the problem are high cost and competitive

pressure from increasing process commoditization (Manning, 2013), but also the

limited ability of regular providers to make use of Africa-specific location advantages.

By contrast, a hybrid model in business services – so-called ‘impact sourcing’

(IS) – is on the rise that may benefit African economies. IS has been adopted mainly

by so-called impact sourcing service providers (ISSPs) who operate as niche players

in global business services, particularly in Africa. Like regular service providers,

ISSPs compete for regional and global client projects based on offering low-cost,

high-quality services, such as tech support, data entry and analytical work, yet, unlike

regular providers, they specialize in hiring, training and using disadvantaged staff

from local communities (Rockefeller Report, 2012). “Disadvantaged” refers to

various conditions, such as limited access to education, geographic isolation, or

physical disabilities (e.g. impaired hearing), which constrain access to regular jobs

99

and careers (Hockerts, 2015). Therefore, depending on the target employee group,

ISSPs serve different communities. In any case, IS is a good example of a

community-based hybrid model as it serves and utilizes particular communities as

resources. Notably, beside self-identified ISSPs, some regular service providers have

also set up often locally bounded IS operations. Boundaries between ISSPs and

regular providers, especially in the context of Africa and other emerging economies,

are therefore rather blurry (Lacity et al., 2012).

One important promoter of the IS model has been the Rockefeller Foundation

which introduced IS as part of their Digital Jobs Africa Initiative through pilot

projects in Kenya, Ghana, South Africa, and Nigeria (Rockefeller, 2012). The early

focus on sub-Saharan Africa followed a long tradition of community-based social

projects, education and employment initiatives in that region. In fact, one important

role model for IS was the Monyetla Work Readiness program in South Africa – a

program specializing in recruiting, screening and placing people from impoverished

backgrounds (Impact Sourcing Conference 2011). Since then, IS has become a

growing niche market. Forecasts estimate IS to employ 3 million people and capture

17% of the global business services market by 2020 (Avasant, 2012). Samasource, a

major ISSP operating in India and Africa, estimates that since 2008 they have

employed close to 8,000 IS workers whose incomes have increased 3.7 times over a

period of four years (Samasource, 2016). Digital Divide Data (DDD), another

important IS player, has hired more than 2,000 youths from Kenya, Cambodia and

Laos since 2001. According to DDD, 670 of their staff were able to complete college

education while working for them at an average monthly salary of $365 (DDD Impact

100

Report, 2014). At the same time, global clients have expressed growing interest in

pursuing IS opportunities in particular in Africa (Bulloch & Long, 2012).

Notably, IS models have also been adopted outside of Africa (Lacity et al.,

2012; Kannothra and Manning, 2016), yet African firms remain the main adopters.

They share particular features that distinguish them from ISSPs elsewhere. First, they

focus on hiring from urban communities, notably young disadvantaged people from

slums and townships, and they mostly serve end clients directly. By contrast, Indian

and U.S.-based ISSPs mainly practice rural sourcing, i.e. they specialize in hiring

from rural communities, and often operate as subcontractors (Lacity et al., 2012;

Kannothra and Manning, 2016). Second, African ISSPs have been innovators in

aligning client acquisition with IS models. For example, Craft Silicon (Kenya), which

specializes in training and hiring part of their staff from an urban slum, mainly

markets to microfinance organizations, i.e. clients whose business model has a social

component as well (Craft Silicon Foundation, 2016). Similarly, DDD, which focuses

on hiring and training hearing-impaired staff who lack education and employment

opportunities in an economy like Africa, targets mainly public service organizations,

such as libraries, for whom they do non-voice data entry and analysis that are

customized for the needs and limitations of their staff. By contrast, many Indian

ISSPs have not managed to create lasting synergies between their IS staffing model

and their client acquisition strategy (Kannothra and Manning, 2016).

Yet, we still lack an understanding of how African ISSPs have been able to

effectively build and serve an IS market and under what conditions in the context of

sub-Saharan Africa IS models have in fact been superior to regular business models in

serving regional and global outsourcing clients. To analyze this question, we use

101

Peng’s Tripod model (Peng et al., 2008, 2009) as a framework as it allows for a multi-

level analysis of institutional, industry and firm dimensions in affecting strategic

options within firm populations. Such a multi-level analysis also corresponds with the

idea that catch-up processes are driven by the interplay of economic policies, industry

dynamics, and firm capabilities. However, the Tripod framework is not a predictive

model but rather a sensitizing device that ‘suggests directions along which to look’

rather than ‘prescriptions of what to see’ (Blumer, 1954, p. 7). We further bring

attention to the fact that each ‘leg’ of the tripod model can be analyzed from a local,

domestic/regional and global perspective. We thus attempt to contextualize the sub-

Saharan business services industry within a dynamic global business context.

The first leg of Tripod refers to economic and industry conditions. Similar to

Porter’s work on the competitive advantage of nations (1990), and the ongoing debate

on geographic clusters (see e.g. Porter, 2000; Iammarino and Clark, 2006; Lorenzen

and Mudambi, 2013) this dimension points to the importance of availability of labor

and other factor conditions, size of potential markets, customer demand and other

related factors in influencing strategic options of firms. Here, it will be particularly

important to understand the interplay of global or regional client demands for business

services and local economic conditions, such as labor markets. For example, to what

extent does the African economic context provide certain advantages for community-

based hybrid businesses in serving regional or global clients respectively? And to

what extent do industry and economic conditions differ in different African countries,

leading to different levels of hybrid model adoption? Specifically, we focus in this

study on the contexts of Kenya and South Africa.

102

The second leg refers to institutional conditions and their enabling and

constraining effects. Following Peng et al., (2008), we pragmatically pull together

both economic and sociological perspectives on institutions: Whereas the former

focus on formal and informal “rules of the game”, including sanctions and incentives

(North, 1990), the latter emphasize how institutions in terms of relatively stable

norms, rules and frameworks give meaning and help actors manage uncertainty

(Scott, 1995). In our study, we look in particular at the importance of informal

infrastructures, such as the role of local community organizations, and economic

policies and funding programs. In this regard, both global and domestic/local

institutional conditions are important. To what extent, for example, do global

institutional conditions complement or compensate for domestic/local institutional

conditions in supporting hybrid businesses in the context of business services? To

what extent do institutional conditions differ across African countries in a way that

affects the adoption of hybrid models, in conjunction with economic and firm-level

factors?

The third leg in our model are firm resources and capabilities. While we

follow the notion that firms develop certain capacities that are more or less unique,

valuable, and hard to imitate (Barney, 1991; Wernerfelt, 1984), thus explaining firm

heterogeneity, we also stress the fact that firm resources and capabilities may co-

evolve with industry and institutional conditions in particular geographic and industry

contexts (Volberda and Lewin, 1999; Jacobides and Winter, 2005). In this study, we

are particularly interested in how resources and capabilities of certain firm

populations – rather than individual firms – affect their strategic opportunities, in

conjunction with industry and institutional conditions. Two central sub-populations

103

we compare are service providers in Kenya and South Africa respectively. For

example, we seek to understand to what extent their specific strategic orientations and

capabilities, along with economic and institutional factors, make them more or less

inclined to adopt hybrid models. In this regard, we also seek to understand what role

access to local community resources plays (see e.g. Kistruck et al., 2013b; Holt and

Littlewood, 2015; Linna, 2012). Also, how does ownership structure and origin of

firms matter: to what extent do locally grown firms make use of community resources

differently than firms with foreign headquarters?

Data and Methods

We adopt a qualitative case study approach to examine under what conditions the

adoption of hybrid models has been a strategic opportunity for firms that operate in

Sub-Saharan Africa and serve regional and global clients, based on the case of global

business services operations in Kenya and South Africa. Qualitative methods can be

used to explore complex phenomena about which little is known and/or about which a

novel understanding is needed (Strauss and Corbin, 1998; Maxwell, 2013).

Specifically, we use an embedded multi-case design (Yin 2003) to generate

and differentiate findings in line with the tripod model of strategic analysis (Peng et

al., 2008). We selected both hybrid and regular service providers across two country

contexts – Kenya and South Africa – to better understand how firm

resources/capabilities, economic and institutional conditions jointly affect the

adoption and strategic potential of hybrid models. We selected Kenya and South

Africa as our two country contexts because both countries share important similarities

that qualify them as appropriate case contexts for our study. First of all, they are two

104

of the major destinations for business services in Africa (Abbott, 2013). Also, they

both share similar location conditions, such as high English literacy and a fairly well-

developed IT infrastructure. Finally, which is particularly important for our study,

both countries have been a preferred experimental ground for IS models. In particular,

IS experiments in South Africa became a role model for Rockefeller Foundation in

establishing and supporting IS as a business model, and Kenyan service providers

were some of the first major adopters of IS models in Africa, partly in collaboration

with Rockefeller Foundation.

The two countries also differ in two important ways which makes them

interesting contexts to compare and which is also reflected in the selection of

interviewed firms from each country. First of all, despite comparable early

experiences in IS, the IS model has been much more widely adopted by service

providers operating in Kenya than by those operating in South Africa. While we were

able to interview firms with both regular and IS models in both country contexts, the

majority of case firms in Kenya are ISSPs, whereas the majority of firms in South

Africa self-identify as regular providers. This remarkable difference motivated us to

better understand key factors promoting or hindering IS model adoption. Second, the

business service industry in Kenya is dominated by locally or regionally owned, small

or mid-size providers serving diverse regional and international clients, whereas the

South African provider population is dominated by relatively large, mostly foreign-

owned call center operators serving mostly European clients, specifically from the

UK. As we show below, this difference has had a profound effect on the extent to

which hybrid models have been adopted. Yet these firm-level effects cannot be seen

105

isolated from important industry and institutional contexts which we also examine in

detail below.

Table 6 Overview of case firms

Firm,

Country,

(Ownership)

(names

changed)

Main Clients:

industry and

location

Services Provided

Operating Model (impact

sourcing/regular provider)

KEI1

(Kenyan ISSP

1)

Kenya

(Foreign:

from

Cambodia,

Laos)

Domestic and

International

e-publishing,

digitization and

content management

(domestic and

international

clients), field

research and product

marketing

Impact sourcing

Operates its delivery center

out of Nairobi, employing

youths hailing from urban

slums, economically

weaker sections etc. and

some of who are pursuing

college degrees along with

their full- time jobs

KEI2

(Kenyan ISSP

2)

Kenya

(Domestic)

International

clients

Voice and data

services, IT enabled

services, custom

software

development and IT

training

Impact Sourcing.

Employs around 400

associates in two locations-

Kenya and Uganda.

Recruits people from urban

slums and poor

communities. Helps in

developing skilled

manpower through

community learning

centers.

KEI3

(Kenyan ISSP

3)

Kenya

(Domestic)

Mostly

domestic and

some

international

(Africa based)

clients.

Banking,

microfinance

and insurance

clients.

IT Services, BPO

services including

data services.

Impact Sourcing

Recruits from urban slums

while maintaining a regular

work force. Employees for

client facing roles are

based out of India, while

main operation for BPO

services located in Kenya.

Runs mobile training bus

in urban slum.

SAI1 (SA

ISSP 1)

South Africa

(Domestic)

Local civic

governments,

domestic

telecom,

financial

Voice support, back

office support,

transcription,

Impact Sourcing:

Work for study model.

Employs students attending

a popular management

institute graduate

106

service

clients.

programs; students get fee

waiver and stipend for

working at the ISSP. Sub-

contract with larger

companies like Aegis,

Microsoft etc.

KER1

(Kenyan

Regular

Service

Provider 1)

Kenya

(Domestic)

Domestic,

International

Call center and BPO

Services

Regular Service Provider.

Employs youth both with

and without college

education; self-identifies as

a regular service provider,

even though it also runs

training programs in slums

KER2

(Kenyan

Regular

Service

Provider 2)

Kenya

(Domestic)

International

and domestic;

builds

insurance and

HR IT

applications

for clients.

IT services-

development and

support. Small

recruiting division

on behalf of other IT

companies

Regular Service Provider. Domestic operations-

software customization

limited to Nairobi city.

SAR1 (SA

Regular

Service

Provider 1)

South Africa

(Foreign:

UK)

International

and domestic

clients;

telecom and

tech

companies.

Customer service

(voice and technical

help desks), data

management

services.

Global regular provider,

Local impact sourcing;

Subsidiary of UK based

service provider. Supports

other ISSPs, manages a

CSR program for

Microsoft.

SAR2 (SA

Regular

Service

Provider 2)

South Africa

(Foreign:

India)

International

and domestic;

Customer support

service (voice, IT

help desk etc.)

Global regular provider,

Local impact sourcing

Regular outsourcing and

some impact sourcing in

association with other

ISSPs. Also operates from

other international

locations.

SAR3 (SA

Regular

Service

Provider 3)

South Africa

(Foreign:

Switzerland)

International;

airlines,

telecom

companies

from Europe.

Customer support

service (voice, tech

support etc.)

Regular Service

Provider;

Also operates from other

international locations.

SAR4 (SA

Regular

Service

Provider 4)

South Africa

International

clients

mostly;

domestic

client- South

Customer Support

Service. Regular Service Provider


service provider; operates

from international

locations in UK

107

(Foreign:

UK)

African

government

(consulting) and India

(BPO). Some Impact

Sourcing as the company

employs staff from

Moneytla Program of the

South African government.

SAR5 (SA

Regular

Service

Provider 5)

South Africa

(Foreign:

UK)

Domestic and

international;

telecom and

financial

services.

Customer service

(voice support

mainly)

Regular Service

Provider;


service provider.

SAR6 (SA

Regular

Service

Provider 6)

South Africa

(Foreign:

UK)

International

and domestic.

Legal Process

Outsourcing Regular Service Provider.


service provider.

Table 6 gives an overview of all service providers included in this study. In

total, we studied 12 service providers operating in South Africa or Kenya: 4 ISSPs, 6

regular service providers, and 2 special cases of firms operating as ISSPs locally,

while running as regular providers outside of Africa. Services of ISSPs range from

data entry and analysis, e-publishing and transcription, to IT services and software

development. Importantly, all providers serve external clients, yet the clients served

may range from regional to global, from businesses to governments, NGOs and public

service organizations. We categorized most providers based on their self-descriptions

– in interviews and on websites – as well as secondary data, specifically other studies

and reports on IS (e.g. Lacity et al., 2012). As for the two special case firms, their

specific model became apparent through interviews with firm representatives and

expert industry observers. We discuss them in detail below. Table 6 lists all providers

(anonymous) and informs about whether a provider is locally vs. foreign-owned,

108

which clients are being served, which services are provided, and how the IS or regular

sourcing model is implemented.

Importantly, we selected case firms in two rounds of data collection whereby

we followed a ‘replication logic’ (Yin 2003) towards a ‘generalization in small steps’

(Diesing, 1971). For the first field trip and round of data collection in Kenya (in

2012), we selected four ISSPs and one regular provider, most of which were small

and locally owned. Firm selection was based on secondary reports on important ISSPs

in Kenya (Lacity et al., 2012) as well as recommendations from the national ICT

board. The second round of data collection in South Africa (in 2014) combined

principles of ‘literal replication’, i.e. adding cases from the same category to increase

external empirical validity, with ‘theoretical replication’, i.e. adding cases that differ

in theoretically relevant ways to differentiate findings (Yin, 2003). Specifically, we

selected one ISSP and five regular providers, whereby two of the latter have adopted

hybrid recruiting principles. This allowed us to increase the sample of regular

providers in support of a more robust comparison of strategic challenges and

opportunities of hybrid vs. regular providers operating in Africa. Also, most selected

firms were rather large, and mostly foreign-owned, which allowed us to identify

important differences in structural conditions affecting small and locally-owned vs.

larger, foreign-owned providers. Similar to the first round, the selection of cases was

in part based on prior studies of hybrids (Lacity et al., 2012) and recommendations

from Rockefeller Foundation and the national outsourcing association.

Main data source were semi-structured interviews with senior managers at

service provider firms, complemented by interviews with policy-makers, foundations

and other institutions. In total, we conducted 26 interviews of about 1 hour each (on

109

average). In addition, we screened available materials on the development of the

regional business services industry. In Kenya, we conducted 13 semi-structured

interviews with managers of both ISSPs (4) and regular service providers (2), as well

as policy-makers and ministry staff members (5) and industry experts (2) from local

universities in the capital Nairobi. Typically, each firm was interviewed once, in some

cases multiple interviews were conducted with firm representatives. The selection of

interview partners reflected the three dimensions of the tripod model: Policy-makers,

e.g. the Kenya ICT Board, and industry experts, e.g. university professors, were

interviewed to better understand industry conditions and institutional environments.

Interviews with IS and regular providers focused on firm resources and capabilities,

client-seeking and growth strategies, employment and training practices, and major

managerial challenges. We used standard interview templates for each group to

increase reliability in the data collection process. Replicating this data collection

design in South Africa, we used the same interview templates, again yielding 13

interviews based on the same selection criteria – with both mainstream providers (5),

ISSPs (2), representatives of a major industry association (3), local representatives of

the Rockefeller Foundation and other industry experts (3). All interviews were

transcribed verbatim.

For data analysis, first, a cross-tabulation of responses was carried out across

case firms and countries. The tripod model served as a grouping device for data

coding: Interviews were coded for information on the perception of economic and

industry conditions, institutional conditions, and firm resources and capabilities,

including client-seeking strategies, hiring and training practices. Second, a

comparison of findings was conducted across the two major case populations of

110

Kenyan vs. South African providers, whereby we paid special attention to differences

related to the business model, size and ownership of providers. Third, following the

practice of axial coding (Corbin and Strauss, 2008), we analyzed and theorized

similarities and differences in strategic opportunities and constraints across the South

African and Kenyan populations of service providers. We thereby focused on how

different constellations of factors across all three tripod dimensions have influenced

strategic opportunities and constraints for hybrid models. Based on that analysis, we

first identified important facilitating conditions across the contexts of Kenya and

South Africa, specifically: underutilized resources from local communities (industry

level), strong presence of local community organizations (institutional level) and

business ties with these organizations (firm level). We then identified combinations of

industry, institutional and firm-level factors explaining differences in strategic

opportunities for hybrid models in Kenya and South Africa. These findings form the

basis for our theorization of multi-level factors affecting hybrid model adoption in

Africa (Eisenhardt, 1989).

We addressed issues of reliability and validity in various ways (Yin, 2003). As

for reliability in data collection, we used a standard procedure (interview template and

data protocol) to increase reliability independent of interviewers. To increase external

validity, a replication logic was applied as described earlier through two consecutive

rounds of data collection. As for construct validity, we managed to discuss emerging

constructs, such as the above-mentioned multi-level conditions of hybrid model

adoption, with interviewees in the second round of data collection. Our analysis also

has some important limitations which we discuss in the final section.

111

Major Findings

We now apply the tripod model to analyze similarities and differences

between the Kenyan and South African institutional, industry and firm-level

conditions affecting the adoption of IS models. Table 7 serves as a guide for the

following analysis. It reports important similarities and differences between Kenya

and South Africa along the three tripod dimensions that help understand enabling and

constraining conditions for hybrid model adoption. We now discuss each tripod

dimension.

Economic and industry conditions

Service providers in Kenya and South Africa (SA) share certain similarities in

terms of the economic and industry conditions they face (Table 7). First, both SA and

Kenyan providers face the challenge of being latecomers in a global competitive

market. Especially, the Philippines is regarded as a major second-tier competitor

attracting outsourcing projects. Importantly, global competitive pressure has affected

both mainstream providers and ISSPs, yet the pressure to match global competition

has been particularly high for regular vendors. The CEO of one major call center in

Kenya remembers:

“For the demand side, there were definitely challenges. And the challenges

really came from unfamiliarity and ignorance in many ways, and unawareness.

So, the businesses in the States and the UK, they had no idea that Kenya was a

destination.” CEO, Kenyan Regular Service Provider 1.

112

Table 7 Comparison of Tripod Conditions of IS Models in Kenya vs. South Africa

Tripod Leg Kenya South Africa

Industry,

Economic

Conditions

Similarities

Latecomers in the global services market, Limited global

client knowledge of IS and African providers;

Underutilizing local labor pool in disadvantaged areas;

Emerging diverse domestic / regional client market

Differences Development-focused

‘destination brand’

Cultural and organizational

ties with foreign markets

(e.g. UK), Mainstream

business-focused and highly

specialized ‘destination

brand’

Institution

al

Conditions

Similarities

Lack of local government funding for IS

Strong presence of local community organizations,

Availability of private and non-profit global IS

sponsors

Differences

No specific incentives Tax policies favoring large-

scale and globally oriented

operations

Black Empowerment

regulation in hiring

Firm

Resources

&

Capabiliti

es

Similarities Loyal and dedicated IS staff, Connections with local

training and community organizations

Differences

Small/mid-size, locally

grown providers, Niche

capabilities serving local

and international clients

without need for scale.

Limited brand power and

scale vs. global rivals

Ability to capitalize on IS

specifically for domestic

clients.

Large, typically foreign-

owned service providers

Specialization in large-scale

mainstream services

targeting international clients

requiring non-IS staff

(In bold font: IS/hybrid- promoting conditions)

At the same time, both countries have rather large underutilized labor pools in

impoverished, mostly urban or suburban, areas. While this potentially favors both IS

and regular business models, it is of specific relevance to IS models, which aim for

113

inclusive employment. For example, about 42 per cent of young people under the age

of 30 are unemployed in SA (National Treasury, South Africa, 2011). Interestingly,

the basic qualification of many unemployed youth is very suitable for service jobs.

Not only do many enjoy good basic technical education, but also good English

language capabilities, while also being in need of further training and employment

opportunities:

“So, the kids from the slums have […] been at second grade schools […].

Usually public schools, but also some mission schools. […] It's also that their

whole environment, you know they are watching TV in English, they are

going down to the local side ground on the weekend. So not everyone, but

when we give people tests and then we select, it's not difficult to find people

who are really good in this” CEO, Kenyan ISSP 1.

“Whether we want to get agents, supervisors, quality managers, project

managers, marketing, IT whatever. Every job we ask for we get 200, 300 CVs

like that. So, we have many avenues and we don’t even need to use many of

the avenues. […] So, it’s very easy. It’s very easy to find people.” CEO,

Kenyan Regular Service Provider 1.

However, providers in both countries continue to face the challenge that IS is

still a relatively young business model. It is thus only just becoming a strategic

consideration for many global clients who seek to couple their sourcing with CSR

strategies. In contrast, low-cost and quality criteria dominate client decisions

regarding sourcing location and provider. As of today, socially responsible sourcing is

114

seen as a ‘bonus’ by many clients, adding to rather than substituting bottom-line

criteria:

“So, they care a little. They […] do not like the idea that they'll be sending

work to some digital sweat shop. […] They like that our workers see the work

as an opportunity to improve their lives and are keen to come to work […]

And then there are those who say I don’t really care as long as my work is

done you know on time and on good quality. And those are the ones who we

seem to be working with.” CEO Kenyan ISSP 1

“When they come down here […] and you take them into the townships, you

generally see them leave with a lump in their throat […] like they do in the

UK where they once a year, you know, Red Nose Day, […] show pictures of

kids starving and mosquitoes all over them. It doesn't work in corporate UK”

South African Industry Expert.

By comparison, a growing local and regional client market is providing

increasing opportunities for both ISSPs and mainstream providers. In part, this is

because regional providers have better access to such clients, but also because ‘local

content’ regulation in part demands the use of local suppliers.

“Right, because they want to improve the employment, improve the business

environment so that they can support local industries in the area. […] If an

international company wants to be in the local tender, […] especially a

Kenyan government tender, they have to have a tie up with a local company.”

CEO Kenyan ISSP 2

115

Importantly, these local or regional clients are rather diverse – from

governments to businesses to NGOs – with equally diverse service demands – from

call centers to data entry, admin support and software development. For example, one

Kenya-based ISSPs has been producing e-books for the National Library, utilizing

hearing-impaired staff. As we discuss further below, diversity in local and regional (as

well as global) client demands provides an important opportunity for ISSPs. Kenyan

rather than SA providers have taken advantage of this opportunity.

Aside from several similarities, there are important differences in industry

conditions between SA and Kenya in affecting the adoption of hybrid models (see

Table 7). One major difference lies in the global image of each country. SA has

become known mainly for ‘voice’ services, i.e. call centers, for UK clients, which has

to do with cultural affinity with the UK and established organizational ties:

“Traditionally South Africa is about voice. […]. If you want cheap go to India,

because it’s commercially far more understood […] I think our delivery is

about good quality voice […] with a person that can genuinely engage with

somebody in the UK. […] There is a cultural affinity.” CEO, South African

Regular Service Provider 1.

This image has promoted call center capabilities but hindered differentiation

into other mainstream or niche services. Importantly, the focus on voice targeting UK

clients has also limited the usability of IS staff. Coming from impoverished

backgrounds, IS staff often do not match global client expectations of standard

English accents (despite available reading and writing skills). Also, lack of cultural

education is associated with overall lack of communication skills:

116

“[IS staff] would give everything to have a kind of job in a call center, but he

cannot speak properly. So, we can’t put him in the call center. You face that

problem continuously when you go into […] township areas. Those people’s

voice skills do not allow them to be on the call center. […] There is [also]

cultural training. There is listening skills. There is questioning techniques.

There is understanding. It goes around all the different aspects of the soft skills

for call centers” CEO, South African Regular Service Provider 2.

By contrast, Kenya has not developed a particular reputation for any service

expertise. However, more than SA, Kenya has become known as a center of

development and NGO work, which has arguably promoted IS adoption and the

acceptance of ISSPs by both global and regional clients. At the same time, it has made

it more difficult for ‘mainstream’ providers to land client contracts, who do not

openly support the development agenda expected by certain clients. For example,

after some early surprise success, one regular provider we interviewed was unable to

scale up and attract new client projects, partly due to cost disadvantages, but also due

to the limited business reputation of Kenya vs. its image as the ‘NGO capital of the

world’. The CEO explains:

“A big company like American Express would not see a lot of stuff happening

about Kenya being a destination. They won't see the call center, BPO, society

or association. […] Kenya is […] the NGO capital of the world, which means

that it is very much of an NGO way of thinking. So, so many of the foreigners,

expatriates and so on are in that space. And the way they think is different

from the way people think on Wall Street or in London in the city. […] And

117

all the people pick up on it because they really care about helping people when

it comes to Africa at the moment.” CEO, Kenyan Regular Service Provider 1.

In sum, despite similar economic conditions, in particular the availability of

underutilized labor pools in impoverished areas, differences mainly in the perception

of Kenya and SA as outsourcing destinations in the eyes of global clients have

favored IS practices in Kenya, and hindered them in SA. Yet, only in combination

with institutional conditions and firm resources and capabilities, these differences

have turned into strategic opportunities or challenges for IS models.

Institutional conditions

The institutional environments facing providers in Kenya and SA, again, share

important similarities. In both countries, community organizations have a long

tradition. These informal infrastructures have been critical for many ISSPs in setting

up their operations. For example, many ISSPs in Kenya work actively with local

community organizations to recruit staff from urban slums (see also below). The

Maharishi Institute in SA, which today operates as a training institute with an attached

call center (Invincible Outsourcing), not only works closely with community

organizations in recruiting students from impoverished families (their target group)

but also serves itself as an important ‘community intermediary’ in contracting with

other businesses interested in utilizing IS staff.

At the same time, and quite interestingly, ISSPs in both countries have

enjoyed very little local government support. Reasons are manifold – from intentional

government ignorance of education and employment needs in slums and townships, to

aspirations of promoting a more prestigious mainstream industry to global clients.

118

This becomes obvious when reading for example Kenyan’s vision 2030 where

business process outsourcing is given an important role, without mentioning the

potential of IS as part of that strategy (Thugge et al., 2009). Likewise, incentives of

the SA government have targeted (and benefited) mainstream call center operators

rather than ISSPs (Vermeulen, 2015). Governments’ perception of why foreign clients

would buy from (or establish) businesses in SA (or Kenya) have played an important

role here. The chair of a major SA outsourcing association elaborates:

“If I am set in South Africa, I will not be successful if I say to a CEO of a

company move your business to Cape Town, because you will be helping

some poor little African boy, you know, that CEO is going to look at me and

say, do you know how I built this business? It was not being nice to people. It

was by making calculated mean decision, so I’m a bit skeptical about the

marketing of impact.” Chair of SA Outsourcing Association.

In light of this situation, global sponsors – both non-profit and private – have

become critical players in promoting IS practices in both countries. In this regard, it is

interesting how especially Rockefeller Foundation, Microsoft and Google have

collaborated in supporting IS initiatives. In some cases, they would serve directly as

co-sponsors of ISSPs:

“One is that Rockefeller Foundation gave us a grant for the initial set up

capital, and we've received a couple of additional grants from Cisco, Microsoft

and Google, both in hardware, software and actually in cash as well, to support

to set up this.” CEO, Kenyan ISSP 1.

119

In other cases, especially in SA, Microsoft for example has taken initiative in

establishing an e-learning platform for youth in townships. Rockefeller has identified

this initiative as a way to boost youth training and employment by both ISSPs and

regular employers. For the same reason, one major SA outsourcing association is

planning to contract with Microsoft to collaborate on training youth:

“We [..] are in the process of signing a deal with Microsoft. So, Microsoft

have got an amazing portal which would open up opportunities for hopefully

thousands and thousands of kids because on that portal you are going to get

free e-learning programs. On that portal, you will get help on how to create a

CV and workshop work, workplace readiness programs.” Chair of SA

Outsourcing Association.

Yet, there is an important difference between the Kenyan and SA institutional

contexts. Whereas Kenyan policies have neither actively promoted nor hindered the

emergence of ISSPs, certain policies in SA have not only favored regular business

models but, in part unintentionally, made the adoption of IS models more difficult.

For example, the SA government has given tax incentives for service providers

targeting global clients for every seat they can fill (Vermeulen, 2015). This policy has

promoted large-scale operations, especially benefitting call centers. Operations of 800

or 1,000 seats are typical. While this policy was designed to support employment

pragmatically and facilitate large client contracts, in competition with India or

Philippines, it has rather unintentionally hindered service differentiation, e.g. into

non-voice services, and made SA more dependent on their call center business. As an

important side effect, this has also prevented major players from targeting more

120

regional clients and possibly from differentiating their portfolio in the process,

including the use of IS staff.

Furthermore, targeting more regional clients has ironically been hindered by

the so-called ‘Black Empowerment’ (BE) law which demands a certain percentage of

staff to be black in order to be eligible for serving the local market. While this policy,

in principle, works in favor of IS business models, since it would encourage the hiring

of staff from impoverished communities, most of which are black, it conflicts with the

strong orientation of the SA business services industry towards large-scale voice

services catering to global clients. This is because the latter typically demand highly

educated staff with standard English accents, which has favored the employment of

white people from urban areas. Even though there is a growing local and regional

client market, BE laws would present significant switching costs for globally oriented

businesses to differentiate into serving more local clients, with a potentially wider

array of services:

“We had a bid for local business [to serve an] airline. […] It comes to us

because we have been around so long. […] The problem is we obviously we

don’t have [black empowerment]. The whole management, ownership

structure is white and European. So, we cannot actually get that business

unless we have to go into partnership with somebody.” CEO South African


Only more recently, the trend has been shifting with several larger clients, not

least Microsoft, taking an interest in further penetrating the SA market. One major SA

call center recently landed a tech support contract with Microsoft involving 2,500

121

seats globally. As part of their own CSR initiatives and because Microsoft is targeting

local customers with these services – and therefore needs to meet BE laws – they

demanded the use of IS staff from the SA call center.

“They went out with a [proposal] to say, ‘Alright, we want to do something

different.’ […] We responded to it to say, ‘Yes we can run it out of South

Africa and we can tick the boxes from the point of view of the impact sourcing

piece.’” CEO, South African Regular Service Provider 1.

In conjunction with increasing regional client interest, BE laws are thus

turning from a burden to a potential facilitator of IS practices, implemented partly

through mainstream providers.

In sum, whereas SA and Kenya share several similarities in institutional

conditions affecting IS models, including the presence of local community

organizations and the availability of global funding (that in part substitutes for lack of

local government support), one important difference are SA tax incentives which have

favored globally oriented mainstream businesses and neutralized the potential gains

from BE laws which could favor IS models.

Firm resources and capabilities

Finally, both Kenyan and SA provider populations share similarities in terms

of how some of their firm-level resources and capabilities favor the utilization of

hybrid models. In particular, many, especially locally grown, providers in both

countries have established connections with training and community organizations,

which facilitate recruitment and training of IS staff. For example, one Kenya-based

122

ISSP utilizes connections with multiple NGOs to recruit from different disadvantaged

groups – here: slum kids and hearing-impaired:

“So, we hire through […] NGOs that work in the slums. And then the other set

are, hearing impaired, the deaf. And again, there's an NGO you know for the

deaf that we hire through.” CEO, Kenyan ISSP 1.

In SA, multiple service providers also maintain connections with community

organizations, mainly through personal connections. Yet only more recently these

connections have come to fruition. For a long time, they would stay rather dormant.

Another important similarity among ISSPs in SA and Kenya is their ability to

promote loyalty and dedication of their IS staff to learning and performing well in the

organization. In an industry where employee turnover is very high, which drives up

re-training costs and endangers client contract renewal, loyal and dedicated staff is a

particularly valuable asset:

“I'm going to say that they love typing their names, but they see the whole job

as a big opportunity, and they tend to also therefore to be very dedicated and

hard-working and be with us for the long term, unlike I mean I'm sure you

know [...] in India and the Philippines …” CEO, Kenyan ISSP 1.

The major difference between SA and Kenyan providers relates to their size

and ownership structure which have impacted the feasibility of IS models in multiple

ways. In Kenya, most vendors are locally or regionally owned, and rather small. This

has been a disadvantage in the regular business services market. Not only do vendors

from India and the Philippines enjoy greater brand reputation, but clients typically

prefer contracting with large vendors with a sufficiently large number of seats

123

available for the job. Scale is particularly important for call centers and tech support,

but also for financial services, data entry and other highly standardized processes, not

least to drive down costs. Interestingly, even Kenyan clients would often avoid

Kenyan providers due to their lack of brand power and size; instead, they would look

for providers from India and Philippines. A provider CEO comments:

“It will take some time for us to penetrate into the larger banks because people

would always look for a reference. […] I think there is still some level of

resistance by the larger banks to promote the local companies because that

attitude is that a local company may not be able to handle large projects.”

CEO, Kenyan ISSP 3.

In face of that challenge, promoting high productivity and low staff turnover

have become important factors in attracting clients. In addition, Kenyan ISSPs have

targeted niche client markets where scale is less of an issue, but competence in

specific, more customized services becomes important:

“We are not at the lowest price and the biggest scale, but maybe we can do

well in certain niches that the Philippines is […] We are not going to be able

to put 15,000 people to work on some data entry project. […] So, we have to

be in things that are a little more specialized, where the market is smaller,

where the teams that the clients need are smaller.” CEO, Kenyan ISSP 1.

As a result, Kenyan ISSPs have developed capabilities in a diverse array of

services targeting a mix of local and international clients: be it software services for

governments; e-books and genealogy data entry for public libraries; or financial data

entry for micro-finance organizations. This has benefited IS models, since IS staff, on

124

the one hand, may lack certain skills needed for services with direct customer contact

(such as voice call), but, on the other hand, their willingness to train in less

mainstream services is higher thanks to their loyalty and long-term dedication to

learn. Over time, Kenyan ISSPs have thus been able to develop a strong brand

reputation within particular niches, like this example shows:

“In terms of microfinance, our brand value is very high […] you walk into any

microfinance, any good-sized microfinance or well-informed microfinance

would always know about us.” CEO, Kenyan ISSP 3.

By contrast, SA service providers, partly thanks to the brand of SA as call

center hub and thanks to tax incentives targeting large-scale and globally oriented

operations, have been specializing in developing and maintaining large-scale voice

service capabilities, hindering the use of IS staff. In addition to industry and

institutional conditions driving this dynamic, the fact that many SA providers are

delivery units of foreign-owned global operations has further amplified their

specialization in mainstream voice services. For example, many SA call centers are

part of a global service network with a certain division of labor: whereas Indian

subsidiaries focus on IT and other non-voice services for global clients, thereby

exploiting their skills advantages, the mandate of the SA operation has been largely

limited to voice services to European, mainly UK-based, clients:

“So, we work across – that’s our geographical footprint. In terms of work in

India, […] there is a common perception that the non-voice staff are in India.

[Clients] are complaining about the experience of voice into India. And the

economic perception is you can put non-voice into India. […] There are

125

certain things non-voice India will avoid: the flow to South Africa from a

competitive perspective like finance and accounting and that kind of stuff.

“CEO, South African Regular Service Provider 4.

Only more recently, the increasing interest of major clients, such as Microsoft,

in entering the SA market and a possible revision of the government tax policy, have

prompted SA vendors to consider the IS model more seriously. Interestingly, in

particular a number of mainstream providers are now developing IS models in SA to

better tap into the domestic market and to utilize related advantages of IS models,

such as high staff loyalty.

“So, where we can put them into a domestic programs where they would fit in

and can actually work within the call center. [..] Very few of them would be

able to make it into the international programs. So, it’s more the domestic

clients where these people can fit in […] I prefer them to be honest because

their tenure tends to be longer. Their dedication of work ethic is a lot better.”

CEO, South African Regular Service Provider 2

To implement IS models domestically, these providers would make use of

existing connections to training and community organizations. For example, the

provider who landed a major Microsoft deal decided, based on existing interpersonal

ties, to collaborate with a local training center in order to secure recruitment of IS

staff and to satisfy IS demands of Microsoft:

“I work with ComEducate [name changed], so we’re already utilizing people

who’ve come through that channel of recruitment and we could obviously then

utilize them on the Microsoft account, so we could tick that box. We also

126

already run Microsoft Training out of the center here.” CEO, South African

Regular Service Provider 1

Similar, another company is further developing an existing joint venture with

the SA-based Maharishi Institute, which includes involvement in curricula and a

procurement contract that ensures meeting criteria of BE regulation, including black

ownership participation:

“We had our trainers go in and assist setting up the whole training program.

Then […] we sourced some of our people through them. So, we try and use

them as a sourcing company for us. […] And part of that is also to support

[…] Black Empowered with 100% black ownership.” CEO, South African


In sum, despite similarities in having established connections with community

organizations, favoring IS models, providers in Kenya rather than in SA have more

strongly focused on IS models, partly because, unlike SA providers, they lacked the

size and global reputation needed to compete with mainstream competitors. By

contrast, mostly foreign-owned SA providers have specialized in large-scale

mainstream call center services and only more recently built up IS branches in

response to increasing interest of global clients.

Strategic opportunities and constraints

Based on the above analysis, we are able to identify both facilitating and

constraining constellations of economic, institutional and organizational factors

affecting the adoption of IS models by business service providers in Africa. Some of

these are similar across the two case contexts of SA and Kenya. Specifically, we find

127

that service providers in both countries face similar constraints: limited global client

trust in African providers and lack of client knowledge about IS (industry), and lack

of local government support in IS models (institutional). At the same time, they also

enjoy similar conditions favoring especially IS models: underutilized labor pools in

impoverished areas (industry); presence of community organizations providing access

to IS staff, and global sponsors supporting IS models (institutional); and business ties

to community organizations and ability to develop highly loyal IS staff

(organizational). Yet, despite these similarities, the Kenyan service provider

population has more widely and successfully adopted IS models than the SA provider

population. This has to do with certain more country-specific combinations of tripod

factors that promote or hinder IS practices.

In Kenya, in particular the image of Kenya as NGO-driven development hub

(industry), and the niche orientation of mostly small and locally grown ISSPs serving

regional and international clients (organizational), combined with available global

funding (institutional), have helped IS models grow into a strategic advantage

compared to regular models. These factors work interdependently. Global sponsors

like Rockefeller have been interested in supporting local businesses with community

ties, and their focus on Kenya has been amplified by its image as development hub.

This, combined with the lack of visible, large-scale mainstream service capabilities,

have prompted ISSPs from Kenya to focus on niche capabilities benefiting IS staff

and targeting niche clients who value long-term, custom service contracts and loyal

staff. By contrast, in SA, certain conditions have hindered IS models, despite

otherwise facilitating conditions. Specifically, the reputation of SA as a mainstream

UK call center hub (industry), government policies supporting large-scale, globally

128

oriented operations through tax incentives (institutional), and mostly foreign-owned

providers that focus on large-scale, mainstream services requiring regular staff

(organizational) have hindered IS models. Again, these factors have been interrelated:

foreign ownership and scale-oriented tax incentives have favored large-scale

mainstream operations (here: voice call) and promoted the image of SA as a

specialized call center hub, making differentiation rather difficult. Only recently, a

growing number of clients have shown interest in using SA-based providers to

support their local operations, which, however, requires a certain percentage of black

staff in operational and leadership positions. Since this requirement benefits mostly

black IS staff from urban or suburban impoverished areas, this trend could in fact turn

IS models into a more attractive strategic option for SA providers in the future.

Discussion: Are Hybrid Models a Strategic Opportunity for African Firms?

Based on the empirical analysis, we now propose under what conditions the

adoption of community-based hybrid models can be a strategic opportunity for firms

in Africa in more general. Again, we use the tripod model (Peng et al., 2008, 2009) as

a sensitizing device to structure our propositions. Figure 5 displays the entire model.

Importantly, we focus here on what we have introduced as ‘community-based’

hybrids that rely on resources from local communities and also benefit those

communities, while serving business clients both locally and internationally. Besides

ISSPs, which we studied here, our findings may be applicable to any sector where

hybrid businesses are dependent on community resources: low-cost BoP innovators,

like the bamboo bike producer mentioned above, that develop specific products and

business ideas in community contexts; or agricultural cooperatives and social-oriented

mining initiatives that employ people from local communities while also supporting

129

their livelihoods and giving them additional educational opportunities (Holt and

Littlewood, 2015; Senthilingam and Hoeferlin, 2015; Global Exchange, 2016; Harris

et al., 2013).

Our findings suggest that certain economic, institutional and organizational

conditions can jointly turn into what we call ‘basic resource endowments’ supporting

the adoption of community-based hybrid models in Africa. First, we find, in line with

prior research, that both Kenya and South Africa have underutilized local community

resources available that may drive the adoption of hybrid models (see also Holt and

Littlewood, 2015; London et al., 2010; Page, 2012). In our particular case, the main

resource is underutilized labor power from disadvantaged communities. In other

contexts, it may be underutilized ideas, technologies, funding, or markets (see Holt

and Littlewood, 2015).

Figure 5 Tripod factors affecting the feasibility of community-based hybrid models

Underutilized resourcesfrom local communities

Strong presence of local community organizations

Business ties with local community organizations

(E)c

on

om

ic/i

nd

ust

ryco

nd

itio

ns

(I)n

stit

uti

on

alco

nd

itio

ns

(F)i

rmre

sou

rces

and

cap

abili

ties

Feasibility of AdoptingCommunity-Based

Hybrid Business Models

Firms origin/ownership (F1)(foreign vs. local)

Business client demand (E2)(global/standard vs. regional/niche)

Social funding support (I1)(local/regional and/or global)

Country image (E1)(business vs. development)

Industrial policy focus (I2) (large/standard vs. small/niche

firms and products)

Firms capabilities/size (F2)(large/standard vs. small/niche)

Basic Resource Endowments Supporting

Access

Access

Affects…

Moderates utility of…

NWW5

130

Second, we showed that the availability of community organizations is vital in

accessing such communities and in allowing businesses to ‘extract’ the resources

hybrid firms need. Again, prior research has made the point that in particular in Africa

such community organizations are important as intermediaries in facilitating social

entrepreneurship and hybrid models (Kistruck et al. 2013b). Third, our study shows

that the utility of such community organizations depends a lot on the ability of

businesses to collaborate with them. Ties between businesses and community

organizations in many African countries therefore seem critical antecedents of

feasible hybrid model adoption.

However, our study goes beyond these basic insights by revealing critical

moderating factors at the industry/economic, institutional and firm level that may

influence the combined utility of basic resource endowments for hybrid models (see

Figure 5). In particular, we observed that despite similar resource conditions favoring

hybrid models, Kenya and SA differ in the degree to which hybrid models have been

actually adopted in the sector we focused on: global business services. Based on these

differences we are able to identify critical moderating factors to inform future

research.

In terms of economic/industry conditions, our findings suggest that, on the one

hand, the country image (E1 in Figure 5) – both in the global client and funding

community – can affect the feasibility of hybrid models no matter how favorable

resource conditions are. Whereas a strong business reputation, like in the case of SA,

may lower the acceptability of hybrid models at least among international clients, the

image of a country in need of development support, like in the case of Kenya, may not

131

only increase the availability of global funding, but also prompt a larger number of

clients to consider social impact as part of their rationale for selecting a supplier from

that country. On the other hand, we find that both global and regional client demands

and expectations (E2) may affect the utility of resource conditions favoring hybrid

models. In particular, we find that highly standardized demand, e.g. for call centers

services, works against the adoption of hybrid models, as it drives cost competition

with global rivals and increases pressure to increase economies of scale (see also

Manning, 2013). This lowers the utility of hybrid models as their dependence on

certain community resources may limit scalability (Linna, 2012). By contrast, niche

client markets may be more attracted to hybrid models, in particular when niche client

demands match the capabilities (and constraints) of hybrid firms, as we described in

the case of Kenyan hybrids. We also find that regional clients can be more easily

targeted by hybrid models, partly thanks to shared social and institutional

environments. In addition, we showed, in the case of SA, that increasing regional

market orientation of global clients prompts them – and their local suppliers – to

comply with Black Empowerment rules, which supports the hiring of staff from

disadvantaged communities in line with the hybrid model.

In terms of institutional conditions, we find that both social funding and

industrial policies matter for hybrid model adoption. First of all, social funding

support (I1) is an important facilitating condition for hybrids to make use of local

community resources. In both Kenya and SA local or national funding has been rather

limited for IS models. However, global sponsors, such as Rockefeller Foundation and

Microsoft, have compensated for that to some degree. Clearly, the image of Kenya as

a development hub has further attracted such funding opportunities. Yet, to what

132

extent external funding can sustainably support the adoption of hybrid models is an

important, long-debated question (see also London et al., 2004, 2010) beyond the

scope of this study. A second important component, according to our findings, is the

focus of national industrial policies (I2). One important constraint for hybrid models

in SA, in the context of business services, has been the strong focus of industrial

policy and related tax incentives supporting employment in mainstream business

services, especially large-scale operations catering to global clients. This has led firms

to develop capabilities that can keep up with global competition and global client

standards, rather than developing more niche-oriented hybrid models. Even though

the Kenyan government has not supported hybrid models directly either, its focus on

small and local business development has indirectly benefited hybrid models.

Finally, our findings indicate that certain firm resources and capabilities either

lead firms to utilize or ‘ignore’ resource endowments supporting hybrid model

adoption. On the one hand, we find that the origin and ownership structure of firms

(F1) matter. First, locally grown firms are more likely to have established local

community ties to make effective use of locally available resources, partly to

compensate for lack of financial and other institutional resources, and to better

compete with global players. This finding is in line with prior research emphasizing

the strong local embeddedness of many businesses in Africa (Rivera-Santos et al.,

2015; Holt and Littlewood, 2015). Conversely, we find that globally operating firms

with subsidiaries in Africa are likely to utilize these subsidiaries for either tapping

into specific resources or for catering to specific clients they cannot serve as well

from other locations. For example, foreign providers in SA would primarily use SA

operations to cater to UK call center clients. This rather high degree of specialization,

133

in competition with other locations worldwide, limits the utility of hybrid models

which are much more interdependent with available local community resources and

needs. On the other hand, we find that firm size and capabilities matter (F2). Large

size allows firms to generate economies of scale and scope and compete in

mainstream markets for standardized products and services, favoring regular business

models. This is the situation with SA call center operations. By contrast, we showed

with the example of Kenya, that smaller size lowers perceived chances of competing

with global peers and prompts firms to develop more custom, niche capabilities,

which opens opportunities for hybrid solutions. Industrial policies play a key role in

creating incentives for either developing large-scale/standard or more niche

capabilities, whereby these policies are partially driven by the structural properties of

national firm populations.

Implications for Future Research

Our study has important implications for future research in particular in three

areas: catch-up processes and firm strategies in latecomer economies; hybrid

organizations; and global business services. First, we inform the debate on catch-up

processes and firm strategies in latecomer economies (Altenburg et al., 2008;

Lorenzen and Mudambi, 2013; Hoskisson et al. 2000). To begin with, we have

emphasized the importance of looking at catch-up as a multi-level process, where

national economic policies interact with industry dynamics, firm capabilities and

strategic choices. Based on this idea, we used the tripod model (Peng et al., 2008) to

capture the interplay of institutional, industry and firm-level conditions in promoting

certain strategic directions within firm populations rather than others. More

specifically, we focused on the potential of hybrid vs. regular business models in

134

helping latecomer economies and their firm populations in general and in Africa in

particular catch up with globally differentiated markets. Our example of hybrid

models indicates the utility of promoting niche models as an alternative to more scale-

dependent low-cost production in mainstream industry segments. The pursuit of niche

models promises to be a viable option when the potential to ‘catch up’ through

conventional means, such as upscaling and ‘upgrading’ (Mudambi, 2008; Gereffi,

1999; Humphrey and Schmitz, 2002), ‘technological leapfrogging’ (Amiti, 2001) or

‘accelerated learning’ (Altenburg et al., 2008) may be limited. This is specifically true

for African economies which face competition not only from advanced but also from

other emerging economies.

Furthermore, our findings suggest, based on the example of hybrid models,

that the global and regional competitiveness of firms from latecomer economies can

rely on their embeddedness in local communities. Our focus on communities was

motivated by prior research suggesting that in particular African businesses are often

strongly embedded in local communities (Rivera-Santos et al., 2015; Holt and

Littlewood, 2015). In line with this insight, we find that African countries, here Kenya

and South Africa, share important conditions – underutilized community resources,

community organizations, and business links to such organizations – that favor

community-based hybrid business models, such as impact sourcing. Future studies

could examine to what extent such community resources also benefit other industry

sectors in Africa and beyond. Whereas prior research on emerging economies has

often pointed out the challenges of lack of infrastructure, institutional voids, political

instability and other factors (Hoskisson et al., 2000; Meyer et al., 2008), we suggest

that community ties may in fact be an important, underappreciated location advantage

135

– both for firms originating from these locations and for foreign firms entering these

locations. However, the stronger ability of local firms to build and use community

links is expected to be a source of liability of foreignness (Zaheer, 1995) for firms

entering such markets. In this respect, the notion of community ties may also add

nuance to prior debates on the role of ‘business networks’ (Forsgren et al. 2005) and

‘insidership’ (Johanson & Vahlne, 2009) as barriers to entry into emerging economies

in particular.

However, we also find that leveraging community resources requires both

institutional and firm-level openness to using community linkages and serving niche

markets rather than more scale-dependent mainstream markets. This may also require

a shift of attention from large corporations and their typically more mainstream

markets towards more nimble, small or midsize enterprises that specialize in serving

more locally embedded niche markets. In addition, the growing trend of international

social ventures, many of which specifically innovate for and cater to BoP markets

(Zahra et al., 2008; Chen, 2012), may motivate an increasing interest in studying

processes of setting up and maintaining linkages with communities and community

organizations to better serve such markets. In this respect, we expect local

governments to gradually shift attention from supporting mainstream global

businesses – and related tax incentives – to supporting hybrid and social ventures that

make better use of location advantages, while differentiating from global competitors.

Second, our findings inform research on hybrid organizations (Smith et al.,

2013; Battilana and Lee, 2014), in particular by introducing the tripod model (Peng et

al., 2008, 2009) as an analytical tool to better understand hybrid model adoption. Prior

research has focused a lot on potential managerial tensions hybrids face in promoting

136

business growth and professionalism while staying true to their social mission (see

e.g. Battilana and Dorado, 2010; Clifford, Markey, and Malpani, 2013; Pache and

Santos, 2010). We add to this body of research, on the one hand, by specifying

‘community-based hybrids’ as a particular type of hybrid that is strongly embedded in

local communities, while also being potentially able to serve regional and global

markets. We encourage future research to carefully study organizational structures,

governance modes and operational challenges of this type, which seems to be

particularly important in emerging economies. On the other hand, we provide a more

context-sensitive understanding of the feasibility of hybrid models, by looking at the

interplay of economic, institutional and firm-level factors supporting or constraining

hybrid models, based on the example of ISSPs. Specifically, we identified critical

resource endowments driving the adoption of community-based hybrid models –

underutilized community resources, community organizations, and business ties with

these organizations – as well as key moderating conditions that may either support

those resource endowments or neutralize their utility.

Also, we demonstrated the importance of looking at local and global industry

conditions affecting the feasibility of hybrid model adoption as well as the role of

scale. Prior studies have primarily looked at institutional conditions and

entrepreneurial antecedents of hybrid models (see e.g. Battilana and Dorado, 2010;

Battilana and Lee, 2014), but have largely neglected industry conditions. Specifically,

we find that in global business services the market for standardized services that

appeal to global clients has matured and is increasingly difficult to enter. Building up

large-scale operations is almost a requirement to drive down costs and to take on large

client projects. Many smaller providers are disadvantaged compared to larger peers.

137

However, since, overall, business services are still a growing market, and since

customer markets and demands keep differentiating, there is continuous ‘space’ for

the co-existence of niche models that appeal to smaller customer segments. This

opens the door for experimentation with hybrid models and allows new individual

entrepreneurs to enter the industry. Also, from an economic development point of

view, supporting a growing community of hybrid and other niche entrepreneurs may

to some extent compensate for the limited development impact of any particular firm.

In other words, whereas the relatively smaller size of many African firms may be a

competitive disadvantage and employment barrier (Iacovone et al., 2013), which has

prompted governments to incentivize scaling up, building up a community of smaller-

scale niche hybrid players instead may not only reduce competitive pressure from

global peers but also generate substantial, potentially even more inclusive

employment opportunities.

Third, our findings contribute to research on the global business services

industry (Ethiraj et al., 2005; Manning et al., 2008, 2015) and the potential of impact

sourcing models (Avasant, 2012). First of all, we indicated earlier that impact

sourcing may grow into an important market segment within the global services

industry, with an estimated market share of 17% by 2020 (Avasant, 2012). This

indicates that socially responsible services outsourcing is becoming a growing client

for clients. We thereby show how impact sourcing, as a form of that, may be adopted

to different degrees: whereas some providers define their entire operation in line with

impact sourcing, others may choose to only partially adopt this practice, e.g. in line

with specific local resource conditions and client markets. This also adds nuance to

latest research on the internationalization of service providers. Whereas prior studies

138

have shown that service providers increasingly globalize and set up hubs with access

to relevant resources and in time zone proximity to core clients (Manning et al., 2015;

Niosi and Tschang, 2009), our study suggests that foreign providers may be

increasingly pressured to ‘locally adapt’ their operations – to client demands, local

regulation, and institutional expectations. One example we gave is a UK-based call

center provider that has been pressured by a major global client to develop impact

sourcing capabilities in South Africa in order to support the client’s local sourcing

needs. Beyond client and institutional pressure, the opportunity to boost staff loyalty

and keep costs low at the same time, while also signaling social responsibility, may

provide another rationale for adopting location-specific impact sourcing as a global

service provider.

This in turn raises important questions about the balance of

standardization/global integration and local responsiveness in the global services

industry (see in general Ghoshal and Bartlett, 1990). On the one hand, global business

service providers face continuous pressure to drive down costs and streamline

operations while meeting high quality standards in order to stay competitive in a

maturing industry (Luo et al., 2012). As we show in our study, this pressure has been

a major reason for foreign providers in South Africa to avoid the impact sourcing

model, since it would conflict with global mainstream client expectations. On the

other hand, increasing commoditization of services is driving both small and large

providers to identify new ways to differentiate from competitors, whereby impact

sourcing – and related access to underutilized local labor markets and potentially very

loyal IS staff – may become an important option. Prior studies indicate that in recent

years many providers have tried to mainly differentiate at the global level, e.g. by

139

adopting global delivery models, which involve setting up hubs around the globe to

bridge time zones and optimize service delivery for clients (Ang and Inkpen, 2008;

Manning et al., 2015). However, establishing such models can be costly and may not

be appreciated by all clients (Manning et al., 2015). In view of this, socially

responsible and locally embedded impact sourcing may be another viable strategy to

differentiate for both smaller and large providers. This may however drive tension

between meeting client demand for predictable streamlined service delivery across

locations and accommodating location-specific employment and training

requirements for IS staff (see also Kannothra and Manning, 2016). Future research

needs to unpack these tensions in order to better understand the potential and

limitations of hybrid model adoption as a differentiation strategy in global business

services.

Our study also has some important implications for managerial practice and

policy-making. On the one hand, it may inform firm decision-making, in particular

with regard to adopting hybrid models in particular industry contexts. We suggest that

in particular those hybrid models which depend on community resources, such as

labor and local product ideas, are only feasible if firms have access to such resources

through community organizations. However, availability of funding, industry policies,

client demands, and firm capabilities may either enhance or diminish the utility of

those resources. On the other hand, our study may inform policy-making. Most

importantly, we suggest that African governments and business promotion agencies

have neglected the market potential of hybrid model. By focusing too much on regular

businesses and global client demands, African economies run the risk of becoming

subject to fierce cost competition. Instead, we suggest a stronger focus on niche

140

businesses which make better use of Africa-specific local resources and advantages,

and which can develop with greater protection from global competitors.

Our study also has some notable limitations. First of all, given data constraints

and the rather young trend of impact sourcing, our ability to measure profitability and

social impact was limited. In this regard, we acknowledge that there is an ongoing

debate around whether hybrid models can actually balance business and social

objectives (Porter and Kramer, 2011), or whether there is constant tension between

them (Crane et al., 2014). Second, our two-country comparison suggests that

heterogeneity in business conditions within Africa may be vastly underestimated.

However, more studies are needed to better understand ‘varieties of capitalism’ within

Africa, which may affect our understanding of viable catch-up processes, firm

strategies and entrepreneurial dynamics in these countries. Third, even though we

were able to collect data across twelve service providers in two country contexts,

which allowed us to make interesting theoretical distinctions, we lack more in-depth

data for any particular firm case. Nor did we have longitudinal insights into how firms

have dealt with institutional, industry and firm-level conditions over time. Also, our

theorization of strategic opportunities of community-based hybrids in Africa is limited

to ISSPs and needs to be complemented with data from other sectors. We thus

encourage future studies to adopt longitudinal designs and compare hybrid model

adoptions across different industry contexts – in Africa and beyond.

In sum, we have discussed hybrid models as viable strategic opportunities for

firms operating in Africa. While pointing out favorable resource conditions we also

emphasized the importance of moderating factors at the industry, institutional and

firm level. This study broadens the debate on catch-processes processes and prospects

141

of African businesses in the global economy, which has important implications for

future research, policy-making and firm strategy.

142

References

Abbott, P. (2013). How can African countries advance their outsourcing industries:

An overview of possible approaches. The African Journal of Information

Systems, 5(1), 27-35.

Abdulai, M. S., Kwon, Y., & Moon, J. (2012). Intellectual capital and firm

performance: an empirical study of software firms in West Africa. The African

Journal of Information Systems, 4(1), 1.

Apte, U. M., & Mason, R. O. (1995). Global disaggregation of information-intensive

services. Management Science, 41(7), 1250-1262.



Amiti, M. (2001). Regional specialization and technical leapfrogging. Journal of

Regional Science, 41(1), 149-172.

Ang, S., & Inkpen, A. C. (2008). Cultural intelligence and offshore outsourcing

success: A framework of firm‐level intercultural capability. Decision Sciences, 39(3),

337-358.

Arora, A., Arunachalam, V. S., Asundi, J., & Fernandes, R. (2001). The Indian

software services industry. Research policy, 30(8), 1267-1287.

Athreye, S. S. (2005). The Indian software industry and its evolving service

capability. Industrial and Corporate Change, 14(3), 393-418.

Avasant Report. (2012). Incentives and Opportunities for Scaling the “Impact

Sourcing” Sector. Available at:

https://www.rockefellerfoundation.org/report/incentives-opportunities-for-scaling-the-

impact-sourcing-sector/ (accessed 10 October 2016).

Barney, J. (1991). Firm resources and sustained competitive advantage. Journal of

Management, 17(1), 99-120.



Journal, 53(6), 1419-1440.


from the study of social enterprises. The Academy of Management Annals, 8(1), 397-

441.

Bitzer V., & Hamann R. (2015). The business of social and environmental innovation.

In The Business of Social and Environmental Innovation (pp. 3-24). Springer

International Publishing.

Blumer H. (1954). What is wrong with social theory? American Sociological Review,

19, 3-10.


‘new economy’outcomes: cluster formation in the new Silicon Valleys. Industrial and

Corporate Change, 10(4), 835-860.

https://www.rockefellerfoundation.org/report/incentives-opportunities-for-scaling-the-impact-sourcing-sector/


143

Bryceson, D. F., & Jønsson, J. B. (2010). Gold digging careers in rural East Africa:

Small-scale miners’ livelihood choices. World Development, 38(3), 379-392.

Bulloch, G., Long, J. (2012). Exploring the Value Proposition of Impact Sourcing.

Rockefeller Foundation, January. Available at:

https://www.rockefellerfoundation.org/app/uploads/Exploring-the-Value-Proposition-

for-Impact-for-Impact-Sourcing.pdf (accessed on 26 November 2015).

Chen, S. (2012). Creating sustainable international social ventures. Thunderbird

International Business Review, 54(1), 131-142.

Childs, J. (2014). A new means of governing artisanal and small-scale mining?

Fairtrade gold and development in Tanzania. Resources Policy, 40,128-136.

Clifford, J., Markey, K., Malpani, N. (2013). Measuring social impact in social

enterprise: the state of thought and practice in the UK. London. E3M.

Corbin, J., and Strauss, A. (2008). Basics of Qualitative Research, 3rd edition. Los

Angeles, CA: Sage.

Craft Silicon Foundation. (2016). Available at:

http://www.craftsiliconfoundation.org/index.php/en/what-we-do (accessed 10 October

2016).

Crane, A., Palazzo, G., Spence, L.J., & Matten, D. (2014). Contesting the value of

“creating shared value”. California Management Review, 56(2), 130-153.

Davenport, T.H. (2005). The coming commoditization of processes. Harvard

Business Review, 83(6),100-108.

DDD Impact Report. (2014). Available at: http://www.digitaldividedata.com/impact

(accessed 10 October 2016)

Diesing, P. (1971). Patterns of Discovery in Social Sciences. Aldine Publications.

USA.

Doh, J.P. (2005). Offshore outsourcing: implications for international business and

strategic management theory and practice. Journal of Management Studies, 42(3),

695-704.

Dossani, R., & Kenney, M. (2007). The next wave of globalization: relocating service

provision to India. World Development, 35(5), 772-791.

Eisenhardt, K.M. (1989). Building theories from case study research. Academy of

Management Review, 14, 532-550.

Eisenhardt, K.M., Graebner, M.E. (2007). Theory building from cases: opportunities

and challenges. Academy of Management Journal, 50(1), 25-32.

Ethiraj, S.K., Kale, P., Krishnan, M.S., Singh, J.V. (2005). Where do capabilities

come from and how do they matter? A study in the software services industry.

Strategic Management Journal, 26(1), 25-45.

Forsgren, M., Holm, U., & Johanson, J. (2005). Managing the embedded

multinational: A business network view. Cheltenham, UK: Edward Elgar.

http://www.craftsiliconfoundation.org/index.php/en/what-we-do

http://www.digitaldividedata.com/impact

144

Gereffi, G. (1999). International trade and industrial upgrading in the apparel

commodity chain. Journal of International Economics, 48(1), 37-70.

Ghoshal, S., & Bartlett, C. A. (1990). The Multinational Corporation as an

Interorganizational Network. Academy of Management. The Academy of Management

Review, 15(4), 603-625.

Glin, L.C., Oosterveer, P., Mol, A.P. (2015). Governing the organic cocoa network

from Ghana: towards hybrid governance arrangements? Journal of Agrarian Change,

15(1), 43-64.

GlobalExchange. (2016). Fair Trade Coffee Cooperatives.

http://www.globalexchange.org/fairtrade/coffee/cooperatives (accessed 30 May

2016).

GlobalServices. (2008). The Top 50 Emerging Global Outsourcing Cities. Global

Services Report.

Gruber, V., Schlegelmilch, B.B. (2015). MNEs’ regional headquarters and their CSR

agenda in the African context. International Marketing Review, 32(5), 576-602.

Haigh, N., Hoffman, A.J. (2012). Hybrid organizations: The next chapter of

sustainable business. Organizational Dynamics, 41(2), 126-134.

Harris, D., Derdak, T., Lash, N., Uygur, U., Welch, M., Tuncay Zayer, L. (2013).

Alliance for social enterprise: a framework to develop social entrepreneurship in

emerging economies. Journal of Strategic Management Education, 9(4), 113-132.

Harrison, A.E., Lin, J.Y., & Xu, L.C. (2014). Explaining Africa’s (dis) advantage.

World Development, 63,59-77.

Haveman, H.A., Rao, H. (2006). Hybrid forms and the evolution of thrifts. American

Behavioral Scientist, 49(7), 974-986.

Hilson, G. (2014). 'Constructing' ethical mineral supply chains in sub-Saharan Africa:

the case of Malawian fair trade rubies. Development & Change, 45(1), 53-78.

Hockerts, K. (2015). How hybrid organizations turn antagonistic assets into

complementarities. California Management Review, 57(3), 83-106.

Holt, D., Littlewood, D. (2015). Identifying, mapping, and monitoring the impact of

hybrid firms. California Management Review, 57(3), 107-125.

Hoskisson, R.E., Eden, L., Lau, C.M., & Wright, M. (2000). Strategy in emerging

economies. Academy of Management Journal, 43(3), 249-267.


upgrading in industrial clusters? Regional Studies, 36(9), 1017-1027.

Iacovone, L., Ramachandran, V., & Schmidt, M. (2014). Stunted Growth: Why Don’t

African Firms Create More Jobs?. CGD Working Paper 353. Washington, DC: Center

for Global Development.

http://www.globalexchange.org/fairtrade/coffee/cooperatives

145

Iammarino, S., McCann, P. (2006). The structure and evolution of industrial clusters:

transactions, technology and knowledge spillovers. Research Policy, 35(7), 1018–

1036.

IAOP. (2014). Impact Sourcing 101-Innovative Outsourcing with positive business

and social impact. International Association of Outsourcing Professionals. Available

at: https://www.rockefellerfoundation.org/report/impact-sourcing-101/ (accessed 10

October 2016).

Impact Sourcing Conference. (2011). Impact Sourcing: An Emerging Path to

Sustainable Job Creation. The Rockefeller Foundation.

Jacobides, M.G., & Winter, S.G. (2005). The co‐evolution of capabilities and

transaction costs: Explaining the institutional structure of production. Strategic


Jay, J. (2013). Navigating Paradox as a Mechanism of Change and Innovation in

Hybrid Organizations. Academy of Management Journal, 56(1),137-159.

Johanson, J., & Vahlne, J.E. (2009). The Uppsala internationalization process model

revisited: From liability of foreignness to liability of outsidership. Journal of

International Business Studies, 40(9), 1411-1431.

Jønsson, J.B., & Bryceson, D.F. (2009). Rushing for Gold: Mobility and Small‐Scale

Mining in East Africa. Development and Change, 40(2), 249-279.

Juselius, K., Møller, N.F., Tarp, F. (2014). The long-run impact of foreign aid in 36

African countries: insights from multivariate time series analysis. Oxford Bulletin of

Economics & Statistics, 76(2), 153-184.

Kannothra, C., Manning, S. (2015). Impact Sourcing at ServImpact. Managing

People, Clients, and Growth. In: Sydow, J., Schuessler, E., Mueller-Seitz, G. (Eds.):

Managing Interorganizational Relationships – Debates and Cases. Palgrave

Macmillan.

Kenney, M., Massini, S., Murtha, T.P. (2009). Offshoring administrative and

technical work: new fields for understanding the global enterprise. Journal of

International Business Studies, 40(6), 887–900.

Kepe, T. (1999). The problem of defining ‘community’: Challenges for the land

reform programme in rural South Africa. Development Southern Africa, 16(3), 415-

433.

Kickul, J., Lyons, T. (2012). Understanding social entrepreneurship: The relentless

pursuit of mission in an ever changing world. Routledge.

Kistruck, G.M., Beamish, P.W. (2010). The Interplay of Form, Structure, and

Embeddedness in Social Intrapreneurship. Entrepreneurship Theory & Practice,

34(4), 735-761

Kistruck, G.M., Sutter, C.J., Lount, R.B., & Smith, B.R. (2013). Mitigating principal-

agent problems in base-of-the-pyramid markets: An identity spillover perspective.

Academy of Management Journal, 56(3), 659-682.

https://www.rockefellerfoundation.org/report/impact-sourcing-101/

146

Kistruck, G.M., Beamish, P.W., Qureshi, I., & Sutter, C.J. (2013). Social

Intermediation in Base-of-the-Pyramid Markets. Journal of Management Studies,

50(1), 31-66.

Kolk, A., Lenfant, F. (2013). Multinationals, CSR and partnerships in Central African

conflict countries. Corporate Social Responsibility & Environmental Management,

20(1), 43-54.


sourcing and Impact Sourcing. IEEE Readynotes, IEEE Computer Society.

Lewin, A.Y., & Couto, V. (2007). Next generation offshoring: The globalization of

innovation. Duke University Center for International Business Education and

Research.

Linna, P. (2012). Base of the pyramid (BOP) as a source of innovation: Experiences

of companies in the Kenyan mobile sector. International Journal of Technology

Management & Sustainable Development, 11(2), 113-137.

London, T., & Hart, S.L. (2004). Reinventing strategies for emerging markets: beyond

the transnational model. Journal of International Business Studies, 35(5), 350-370.

London, T., Anupindi, R., Sheth, S. (2010). Creating mutual value: lessons learned

from ventures serving base of the pyramid producers. Journal of Business Research,

63(6), 582-594.

Lorenzen, M., & Mudambi, R. (2013). Clusters, connectivity and catch-up:

Bollywood and Bangalore in the global economy. Journal of Economic Geography,

13(3), 501–534.

Luo, Y., Wang, S. L., Zheng, Q., & Jayaraman, V. (2012). Task attributes and process

integration in business process offshoring: A perspective of service providers from

India and China. Journal of International Business Studies, 43(5), 498-524.

Manning, S., Massini, S., & Lewin, A.Y. (2008). A dynamic perspective on next-

generation offshoring: The global sourcing of science & engineering skills. Academy

of Management Perspectives, 22(3), 35–54.


knowledge work and the rise of knowledge services clusters. Research Policy, 42(2),

379-390.

Manning, S., Larsen, M.M., Bharati, P. (2015). Global Delivery Models: The Role of

Talent, Speed and Time Zones in the Global Outsourcing Industry. Journal of


Maxwell, J.A. (2012). Qualitative research design: An interactive approach. Sage.

Meyer, K.E., Estrin, S., Bhaumik, S.K., & Peng, M.W. (2009). Institutions, resources,

and entry strategies in emerging economies. Strategic Management Journal, 30(1),

61-80.

Moreira, M.M. (2006). Fear of China: is there a future for manufacturing in Latin

America? World Development, 35(3), 355–376.

147


industries. Journal of Economic Geography, 8(5), 699–725.

NASSCOM. (2015). Global sourcing. http://www.nasscom.in/global-sourcing

(Accessed: 05/15/2015).

National Treasury. (2011). Confronting youth unemployment: policy options for

South Africa- Discussion Paper. Pretoria: National Treasury, South Africa.

Niosi, J., & Tschang, F. T. (2009). The strategies of Chinese and Indian software

multinationals: implications for internationalization theory. Industrial and Corporate

Change, 18(2), 269-294.

North, D.C. (1990). Institutions, institutional change and economic performance.

Cambridge university press.

Ozcan, P., Santos, F.M. (2014). The market that never was: turf wars and failed

alliances in mobile payments. Strategic Management Journal, 36(10), 1486–1512.

Pache, A.C., & Santos, F. (2013). Inside the hybrid organization: Selective coupling

as a response to competing institutional logics. Academy of Management Journal,

56(4), 972-1001.

Page, J. (2012). Can Africa industrialise? Journal of African Economies, 21, ii86-

ii125.



Development, 30(9), 1561-1577.

Peng, M., Wang, D.Y.L., Jiang, Y. (2008). An Institution-Based View of International

Business Strategy: A Focus on Emerging Economies. Journal of International

Business Studies, 39(5), 920-936.

Peng, M., Sun, S.L., Pinkham, B., Chen, B. (2009). The Institution-Based View as a

Third Leg for a Strategy Tripod. Academy of Management Perspectives, 23(3) 63-81.

Porter, M.E. (1980). Competitive strategy: Techniques for analyzing industries and

competition. New York.

Porter, M.E. (1990). The competitive advantage of nations. Harvard Business Review,

68(2),73-93.

Porter, M.E. (2000). Location, competition, and economic development: Local

clusters in a global economy. Economic Development Quarterly, 14(1), 15-34.

Porter, M.E., & Kramer, M.R. (2011). Creating shared value. Harvard Business

Review, 89(1/2), 62-77.

Prahalad, C.K., Hammond, A. (2002). Serving the world's poor, profitably. Harvard

Business Review, 80(9), 48-59.

Prahalad, C.K. (2012). Bottom of the Pyramid as a Source of Breakthrough

Innovations. Journal of Product Innovation Management, 29(1), 6-12.

148

Q Drum. (2016). About Q Drum. http://www.qdrum.co.za/about-q-drum (accessed

May 30, 2016).


innovation capability in host countries: a survey from India. World Development,

25(11), 1821–1837.

Rivera-Santos, M., Holt, D., Littlewood, D., Kolk, A. (2015). Social entrepreneurship

in sub-Saharan Africa. The Academy of Management Perspectives, 29(1), 72-91.

Rockefeller Foundation. (2012). Avasant Report- Incentives & Opportunities for

Scaling the Impact Sourcing Sector. Available at:

https://www.rockefellerfoundation.org/report/incentives-opportunities-for-scaling-the-

impact-sourcing-sector/ (accessed 10 October 2016).

Rockefeller Foundation. (2013). Dahlberg Report- Digital Jobs in Africa: Catalyzing



inclusive-opportunities-for-youth/ (accessed 10 October 2016).

Sako M. (2006). Outsourcing and offshoring: implications for productivity of business

services. Oxford Review of Economic Policy, 22(4), 499-512.

Samasource. (2016). Available at: http://www.samasource.org/impact (accessed 10

October 2016).

Saxenian, A. (2005). From brain drain to brain circulation: Transnational

communities and regional upgrading in India and China. Studies in Comparative

International Development, 40(2), 35-61.

Scott, W.R. (1995). Institutions and organizations (Vol. 2). Thousand Oaks, CA:

Sage.

Senthilingam, M. & Hoeferlin, M. (2015). Catch a ride: Ghana's bamboo bikes put

sustainable change in the frame. CNN (Jan 23, 2015). Available at:

http://www.cnn.com/2015/01/20/africa/booomers-bamboo-bicycles-ghana/ (accessed

10 October 2016).

Shenkar, O. (2001). Cultural distance revisited: Towards a more rigorous

conceptualization and measurement of cultural differences. Journal of International


Simplice, A. (2014). Development thresholds of Foreign aid effectiveness in Africa.

International Journal of Social Economics, 41(11), 1131-1155.

Smith, W.K., Gonin, M., & Besharov, M.L. (2013). Managing social-business


Quarterly, 23(03), 407-442.

The Africa Report. (2012). Outsourcing: The Indian connection and Africa.

http://www.theafricareport.com/North-Africa/outsourcing-the-indian-connection-and-

africa.html (accessed 30 November 2015).

http://www.qdrum.co.za/about-q-drum



https://www.rockefellerfoundation.org/report/digital-jobs-in-africa-catalyzing-inclusive-opportunities-for-youth/


http://www.samasource.org/impact

http://www.cnn.com/2015/01/20/africa/booomers-bamboo-bicycles-ghana/

http://www.theafricareport.com/North-Africa/outsourcing-the-indian-connection-and-africa.html

http://www.theafricareport.com/North-Africa/outsourcing-the-indian-connection-and-africa.html

149

Thugge, K., Ndung’u, N., Owino, O. (2009). Unlocking the Future Potential for

Kenya: The Vision 2030. Industry Report.

Volberda, H.W. & Lewin, A.Y. (1999). Prolegomena on coevolution: A framework

for research on strategy and new organizational forms. Organization Science, 10(5),

519-534.

Wernerfelt, B. (1984). A resource-based view of the firm. Strategic Management

Journal, 5(2), 171-180.

Xu, D., & Shenkar, O. (2002). Note: Institutional distance and the multinational

enterprise. Academy of Management Review 27(4), 608-618.

Yin, R.K. (2003). Case Study Research: Design and Methods, 3rd Ed. Sage,

Thousand Oaks, CA.

Zaheer, S. (1995). Overcoming the liability of foreignness. Academy of Management

journal, 38(2), 341-363.

Zahra, S.A., Rawhouser, H.N., Bhawe, N., Neubaum, D.O., & Hayton, J.C. (2008).

Globalization of social entrepreneurship opportunities. Strategic Entrepreneurship

Journal, 2(2), 117-131.

150

CHAPTER 4

HOW SOCIAL-BUSINESS HYBRIDS VARY IN INTERNATIONAL

CONTEXTS: FOUNDERS’ ASPIRATIONS, CLIENT EXPECTATIONS, AND

LIABILITY OF EMBEDDEDNESS

Introduction

Social-business hybrids (SBHs) have become increasingly important

organizational forms (Haigh et al., 2015; Doherty et al., 2014; Battilana et al., 2012).

They are typically defined as ‘organizations that run commercial operations with the

goal of addressing a societal problem, thus adopting a social or environmental

mission’ (Santos et al., 2015). They are sometimes referred to as ‘hybrid

organizations’ or ‘social enterprises’, since they bridge commercial business and

philanthropy (Battilana and Lee, 2014; Battilana et al., 2012). The emergence and

increased acceptance of hybrid forms reflects a broader shift in the global political

economy (Brock and Kim, 2011; Nicholls, 2011; Hoffman et al., 2010) – towards

greater awareness of the role of business in tackling issues such as poverty alleviation,

climate change, education, and healthcare advancements (Kolk, 2016). In this regard,

international SBHs (ISBHs) have become

151

increasingly relevant (Zahra et al., 2008, 2014). ISBHs combine social causes and

commercial operations that cross-national boundaries. Examples include Vision

Spring,

an ISBH focusing on selling affordable eyeglasses through micro franchises in India

and El Salvador (Chen, 2012), and Digital Divide Data (DDD), which trains and

employs people from disadvantaged backgrounds in business process outsourcing in

multiple African and South East Asian countries (see Smith et al., 2012).

Prior research has focused on explaining why entrepreneurs choose to

implement SBHs in general and ISBHs in particular (e.g. Kolk, 2016; Zahra et al.,

2008; Seelos and Mair, 2005). However, as the population of SBHs and ISBHs is

growing, so is the diversity of hybrid business models. Accordingly, recent research

has recognized that SBHs vary considerably in their implementation. For example,

studies have shown that SBHs may be more or less integrated in terms of pursuing

social and commercial goals (Battilana and Lee, 2014; Jay, 2013). Various

contingencies may explain part of such variation, such as different ways of creating

and capturing value, and cost structures (Zott et al., 2011; Yunus et al., 2010),

different growth pace and aspirations (Kannothra et al., 2017), and the broader

institutional context, competitors, customers, consumers, suppliers and other partners

(Kerlin, 2013; Dahan et al., 2010). Yet, especially our knowledge of variation of

ISBHs is limited, despite their increasing empirical relevance (Zahra et al., 2008,

2014). Understanding drivers of variation is important, however, to fully grasp both

the range of challenges ISBHs face and the portfolio of strategic and organizational

152

solutions they can ‘choose’ from to succeed. We thus seek to examine this issue more

systematically.

Drawing from research on entrepreneurship in global supply chains

(Bresnahan et al., 2001; Gereffi et al., 2005; Glückler and Panitz, 2016), and on

antecedents of social ventures (Mair and Noboa, 2006; Lee and Battilana, 2013), we

focus on the role of founders’ background and aspirations, and the nature of

competition affecting variation in business models of ISBHs. Prior studies indicate

that product portfolio and client strategies of global B2B startups are strongly

influenced by the founders’ business network, client expectations, and level of

competition (Bresnahan et al., 2001). Social entrepreneurship research, in turn,

suggests that founders’ background and aspirations may influence the importance of

the social mission vs. commercial goals (Lee and Battilana, 2013). Combining these

research streams, we investigate the following question: How do founders’


international social-business hybrids?

Our study draws on data from Impact Sourcing Service Providers (ISSPs):

global outsourcing firms that serve impoverished communities by employing and

training disadvantaged staff to provide various business services, such as tech support

(Kannothra et al. 2017). Through an inductive study of ISSPs, we find four business

model configurations that seem equally prevalent yet differ in strategic focus and

internal organization: strategically, ISSPs either serve international and domestic

clients, or exclusively domestic clients, and they either prioritize the social mission or

business opportunities. Organizationally, ISSPs either focus on low-cost (lower-

skilled) or differentiated (higher-skilled) services, and they either integrate or

153

decouple social mission and business operations. Explaining this variation, we find

that, on the one hand, entrepreneurs with an international background are typically

more social mission-driven and have the skills and ambition to invest into training

beneficiary staff to be able to offer differentiated services, whereas domestic

entrepreneurs are often more business opportunity-driven, invest little into staff

development, and thus focus mostly on routine low-cost services. Client choice and

management, on the other hand, are mainly explained by how entrepreneurs respond

to what we call ‘liability of embeddedness’, i.e. perceived disadvantages in trying to

win clients outside the community in which their social mission is highly valued.

Coming from highly competitive environments, such as India, this liability is

particularly high, which is why ISSP founders often focus on domestic clients that

buy into the social mission more easily, which is also why such ISSPs typically

integrate social mission and business operations. By contrast, out of less developed

and less competitive contexts, such as Africa, ISSP founders more often also target

international clients. Yet, to meet global client expectations, ISSPs often decouple

social mission and business operations, thus further mitigating liability of

embeddedness.

Our study carries two important implications for future research. First, it

enhances our understanding of antecedents and contingencies of implementation of

international social ventures (Zahra et al., 2008). We establish important theoretical

connections between social entrepreneurship and international venture formation; in

particular by linking the critical tension between social mission and commercial goals

in social enterprises (Smith et al., 2013) to the challenge of strategic positioning in

highly competitive industries and global supply chains (Meyer, 2018). Second, we

154

inform international business research by elaborating on strategies of targeting and

managing international clients in the context of ISBHs. In particular we discuss how

ISBHs are not just subject to liability of newness and smallness (Freeman et al., 1983;

Singh et al., 1986; Carroll, 1983), but what we call ‘liability of embeddedness’, and

how domestic client focus or decoupling strategies can help mitigate this liability.

Models of Social Business Hybrids in International Contexts

Social business hybrids (SBHs) are often discussed as an ideal organizational

form combining features of business and charity (Battilana and Lee, 2014). SBHs can

also be understood as a distinct ‘business model’. That is, SBHs not only have in

common certain organizational features, goals and a revenue model (Chesbrough and

Rosenbloom, 2002), but also external constituents (e.g. clients, suppliers, investors,

partnerships) who are closely involved in the generation and delivery of economic

(and social) value (Zott et al., 2011; Yunus et al., 2010). In fact, as business models,

SBHs are special in creating value towards potentially paradoxical outcomes – social

value creation and generation of profits – often under conditions of high uncertainty

and resource scarcity (Thompson & MacMillan, 2010; Smith et al., 2010).

However, research also suggests that SBHs, while showing some commonality

across contexts, differ in their implementation (Battilana and Lee, 2014). Variation is

becoming even more prevalent as SBHs get implemented in ever more industries and

geographies (Haigh et al., 2015; Doherty et al., 2014; Battilana et al., 2012). For

example, SBHs may differ in the degree and extent to which organizational activities,

workforce composition, inter-organizational activities etc. are integrated or

‘decoupled’, i.e. separating social mission-oriented and commercial operations.

Microfinance organizations for example are typically highly integrated (Battilana and

155

Lee, 2014; Battilana and Dorado, 2010). Integrated models often appear more

‘legitimate’ than decoupled ones, since the latter are seen to run the risk of favoring

the interests of business customers over beneficiaries (Lee, 2014; Jay, 2013) and of

leading to so-called ‘mission drift’ (Battilana and Lee, 2014). However, over time,

SBHs sometimes transition to decoupled models, especially to assist fast growth

(Kannothra et al., 2017).

SBHs can also vary based on how they generate value as well as their own

guiding values. For example, the level of contingent value spillovers and degree of

overlap between clients and beneficiaries may vary (Santos et al., 2015), which has

implications for organizational structure, board governance, human resources

strategy, and performance management. Along these lines, SBHs have also been

classified by governance practices and logics (Mair et al., 2015) – from hybrids

relying on single institutional logics to hybrids combining several institutional logics.

We call such variations of SBHs ‘business model configurations’. While

building on the same principles of hybrid organizing – the combination of social

mission and commercial operations – they denote distinct ways of implementing

social and commercial objectives, and of targeting and communicating with clients

and stakeholders. Prior literature has not researched business model configurations of

SBHs in systematic ways. Yet, with increasing growth of the community of SBHs, as

well as significant strategic differentiation and competitive pressure in industries

within which SBHs are operating, their own variation becomes an increasing concern

(Santos et al., 2015).

We are particularly interested in business model configurations of SBHs in

international contexts (ISBHs). Scholars of SBHs increasingly recognize the

156

importance of ISBHs (Zahra et al., 2008, 2014; Kolk, 2016; Desa and Kotha, 2006).

Their growing relevance parallels increasing Corporate Social Responsibility (CSR)

initiatives of MNEs in host countries (Carroll, 1999; Mintzberg, 1983); concerns

about climate change and environmental sustainability (Levy & Kolk, 2002; Kolk and

Pinkse, 2008); institutional voids and market failures, and poverty reduction

initiatives (Mair and Marti, 2006; Zahra, Ireland and Hitt, 2000; Mair, Marti and

Ventresca, 2012). In addition, concepts like Shared Value (Porter and Kramer, 2011),

Blended Value (Emerson, 2003) and Bottom of Pyramid strategies (Prahalad, 2006)

have gained prominence further fueling the interest in hybrid models at the

international level. Also, with the improvement in technology and communications,

the commercial operations of SBHs are no longer limited to certain locations (Desa

and Kotha, 2006; Desa, 2012; Zahra et al., 2008). At a global scale, entrepreneurs

now offer innovative solutions to some of the pressing problems mentioned above by

means of implementing hybrid models (Perrini and Vurro, 2006). Yet, ISBHs are also

characterized by significant complexity of operations and complex multi-stakeholder

arrangements, which makes them an interesting and at the same time difficult topic to

study (see also Smith et al., 2010).

To date, we lack an understanding about the specific ways in which ISBHs are

implemented in practice. Addressing this gap, we focus in particular on ISBHs

operating in business-to-business sectors, specifically the global IT and business

process outsourcing industry. ISBHs like Digital Divide Data (see e.g. Chen, 2012;

Smith et al., 2012) and Samasource (Gino and Staats, 2012), that have been featured

in prior research, belong to this industry. For entrepreneurs, this industry offers

relatively easy entry points (readily available technology, low-skill and low-capital

157

requirements) when compared to traditional industries like manufacturing (Kenney et

al., 2013) or IT services.

To better understand how business models of ISBHs vary and what drives this

variation, we draw inspiration from two literatures: the literature on antecedents of

social business models in general (Battilana and Lee, 2014; Battilana and Dorado,

2010), and the literature on strategies and operations of regular international ventures

(Zahra et al. 2000) and firms operating in global supply chains (Mudambi, 2008;

Bresnahan et al., 2001; Athreye, 2005; Humphrey and Schmitz, 2002; Gereffi et al.,

2005; Glückler and Panitz, 2016). We also draw from the growing literature on

international social ventures (e.g. Chen, 2012; Zahra et al., 2008, 2014). From these

literatures, we focus here on two central sets of contingencies: the founder’s

background (individual level), and competitive conditions (industry level).

Founders’ background has been discussed extensively both in research on

regular international ventures (Zahra et al., 2000; Bresnahan et al., 2001) and social

entrepreneurship (Battilana and Lee, 2014; Battilana and Dorado, 2010). For example,

research on international ventures suggests that diaspora entrepreneurs returning to

their home country combine business ideas and business models in specific ways, e.g.

by targeting international clients and utilizing local resources (Saxenian, 2005; Pruthi,

2014; Nanda and Khanna, 2010; Kenney et al., 2016). Founders’ background has also

been discussed in research on SBHs. For example, according to Robinson (2006),

entrepreneurs differ in their ability to navigate economic and institutional barriers of

SBHs and in spotting entrepreneurial opportunities. Further, “background” (for

example, previous entrepreneurial experiences, social, moral and educational

background) and “context” (for example, their exposure to social issues) of the

158

entrepreneur is associated with perceived feasibility and desirability of the venture

(Mair and Noboa, 2006; Kickul and Lyons, 2016). In short, prior experience of the

entrepreneur seems to matter both in selecting target markets and in social

entrepreneurial intentions (see also Mair, 2006). However, we know surprisingly little

about how entrepreneurial background matters for starting ISBHs. For example, how

do ‘social entrepreneurial intensions’ affect the way business clients are selected

and/or managed?

At the same time, prior research, in particular on international ventures in

business-to-business sectors, suggests that competitive conditions and related client

expectations matter a lot in terms of how firms position themselves, and how they

target clients (see e.g. Johnson et al., 2008; Zahra et al., 2000). In particular, the

literature on global value chains and production networks has informed this debate

(see e.g. Gereffi et al., 2005; Mudambi, 2008), by suggesting that industries differ in

the relative bargaining power of global buyers and suppliers, and the way client-

supplier relationships are governed, ranging from transactional market transaction to

deeply embedded long-term relationships (see e.g. Gereffi et al., 2005). In extension,

studies have suggested that depending on the competitive positioning of regions, firms

may be likely to take a different position in global supply chains and production

networks, resulting in different client targeting strategies (Humphrey and Schmitz,

2002; Glückler and Panitz, 2016). By comparison, the literature on SBHs has been

relatively silent about the importance of competition and client expectations in

international contexts. This may be because research on ISBHs is relatively new

(Zahra et al., 2008, 2014), compared to research in domestic settings (Battilana and

Lee, 2014). Our study thus addresses the critical question: how do competitive

159

conditions and related client expectations affect market positioning and client

targeting strategies of ISBHs as part of their business model?

We argue and show empirically that in particular when targeting global

business clients, ISBHs face particular challenges compared to regular international

ventures. The international business literature suggests that any entrepreneurial firm

typically faces liabilities of newness and smallness when internationalizing or

targeting international clients (Freeman et al., 1983; Singh et al., 1986; Carroll, 1983).

Especially in highly established industries where global clients maintain longer-term

relationships with suppliers, entrance barriers can be relatively high. On top of that,

we argue that ISBHs in particular may face what we call ‘liability of embeddedness’.

Research on SBHs shows that many SBHs are typically deeply embedded in

particular communities within which their hybrid model is highly valued (Holt and

Littlewood, 2015). Within such communities, SBHs may even enjoy a competitive

advantage compared to regular enterprises in being able to capitalize on community

support – in hiring, marketing etc. (see e.g. Manning et al., 2017). However, when

reaching out to global business clients, who are typically very distant – culturally,

socially and institutionally – from beneficiary communities, lack of client buy-in or

knowledge about the social context of ISBHs may become a challenge. We examine

this issue in greater detail and also address how ISBHs may manage this potential

liability.

The Empirical Context of Impact Sourcing

We examine the research question on variation in business model configurations

using the case of impact sourcing service providers (ISSPs) – an example of social

business hybrids in the global service outsourcing industry. This industry context is

160

particularly suitable for the purpose of our study. First, it is a growing global industry

including a growing segment of hybrid enterprises that serve global business clients

while being embedded in local communities (Kannothra et al., 2017; Manning et al.,

2017). Second, it is an industry with a lot of entrepreneurship happening in emerging

economies (Dossani and Kenney, 2007; Arora and Athreye, 2002), including social

entrepreneurship (Manning et al., 2017). Third, several studies in recent years have

highlighted the importance of diaspora entrepreneurs in this sector (Kenney et al.,

2013; Saxenian, 2005), which makes the case of hybrid enterprises particularly

interesting.

In the past, global supply chains were mostly associated with the supply of

raw materials and manufactured goods (Gereffi et al., 2005). Thanks to digitization

and commoditization of business processes and services (Davenport 2005), such as

call centers, tech support, and analytical services, especially Western client firms

increasingly outsource such services to specialized providers mostly in developing

countries (Doh, 2005). Some of the drivers of this trend are lower costs

(infrastructure, wages etc.), speed of services, and availability of talent (Manning and

Massini, 2008; Patibandla and Petersen, 2002; Lewin et al. 2009). As a result of this

dynamic, a global service outsourcing industry has emerged that specializes in

catering to such client needs. This in turn has created new employment and economic

development opportunities, for example in India, which has become the largest

service outsourcing destination for U.S. and European firms (Reddy 1997; Patibandla

and Petersen 2002; Dossani and Kenney, 2007). However, these efforts have typically

focused on urban, highly trained professionals, while neglecting rural, unskilled, or

disadvantaged people (Upadhya, 2007).

161

Against this background, the practice of ‘impact sourcing’ (IS) has emerged in

recent years, in part driven by early initiatives of the Rockefeller Foundation as well

as local initiatives, specifically in Africa (Rockefeller Foundation, 2013). IS

specifically focuses on the hiring and training of people from disadvantaged groups in

order to promote more inclusive employment and development. Firms adopting the IS

model are called Impact Sourcing Service Providers (ISSPs). Like regular service

providers these hybrid organizations offer high-quality services to international and

domestic firms (clients), while simultaneously promoting inclusive development in

their local community by hiring and training staff that is disadvantaged (beneficiaries)

because of physical disabilities, ethnic or migrant background, lack of formal training

and employment opportunities, and/or geographic isolation (Hockerts, 2015). One

example is Digital Data Divide – an ISSP that provides e-publishing, digitization and

other services out of Kenya, Cambodia and Laos, employing youths and people with

disabilities from urban slums. In the next section, we introduce our data, research

methods and analysis in greater detail.

Data and Methods

Focusing on the context of impact sourcing, we adopt an inductive qualitative case

study approach to examine variations of business models of social business hybrids in

international contexts (ISBHs). More specifically, we use a multi-case design (Yin,

2008). Following a ‘replication logic’ (Yin, 2008) and promoting ‘generalization in

small steps’ (Diesing, 1979), we did a comparative analysis of impact sourcing

service providers (ISSPs) aiming for literal and theoretical replication. Literal

replication focuses on the re-selection of similar cases to increase robustness and

162

validity of findings (Yin, 2008), whereas theoretical replication expands the variety of

cases along relevant criteria and helps predict contrasting outcomes along these

criteria (Yin, 2008). From our findings we develop propositions to inspire future

research.

Even though our approach is inductive, the selection and analysis of cases is

informed by prior research on international ventures in global supply chains

(Saxenian, 2002, 2005; Saxenian and Hsu, 2001; Bresnahan et al., 2001; Gereffi et al,

2005) and research on antecedents of social enterprises (Lee and Battilana, 2013).

Through a purposeful selection of cases (Maxwell, 2012) we accounted for two main

selection criteria reflecting two of the central contingencies of international and social

ventures:

1. competitive conditions, specifically domestic competition for global client

contracts and

2. background of the entrepreneur, specifically international or domestic

background.

In total, we investigated 11 ISSPs that vary along these two dimensions.

Specifically, we focused on ISSPs in Kenya, South Africa, and India for this study -

outsourcing destinations that are among the most important in adopting IS as a niche

business practice (Lacity et al., 2012). Importantly, these business contexts differ

significantly in the degree of sophistication of the global outsourcing industry, and,

relatedly, level of mainstream competition for client projects. India has been the

primary outsourcing destination across service categories for many years (Kenney et

al., 2009; Manning, 2013). Competition for client projects is fierce, and client

expectations of professionalism are very high. By comparison, Kenya and South

163

Africa are latecomers in the global outsourcing space (Manning et al., 2017; Abbott,

2013). Domestic competition for global client projects is much lower. As we discuss

in the findings section, this difference in economic context has an important effect on

ISSP business model configurations.

The case data were collected by two authors as part of an ongoing research on

Impact Sourcing. The selection of ISSPs for this study was primarily based on listings

of important ISSPs in prior studies, such as Lacity et al. (2012), and scanning of

archival research reports and case studies produced by Rockefeller Foundation

(purposive sampling). Also, case access was facilitated by representatives of

intermediary organizations, such as Rockefeller, NASSCOM Foundation (India) and

local business promotion agencies. Both Rockefeller and NASSCOM Foundation

maintain online IS resources aimed at promoting the sector and providing reliable

sources of information on ISSPs (archival data). To study these cases, we conducted

38 semi-structured interviews between 2012 and 2014 with managers of ISSPs,

service outsourcing experts, policy-makers, business promotion agents and

Rockefeller representatives (see Table 8). Interviews with actors external to ISSPs

helped us familiarize with the context and generic challenges of IS (see for the value

of interviewing “elites” or “experts”, Rallis and Rossman, (1998)). To increase

external validity and robustness of our findings (Yin, 2008), we also collected

secondary archival data on each ISSP through their websites, as well as policy reports

and practitioner articles on IS.

164

Table 8 Overview of the dataset

ISSP CEOs

and

managers

Regular

CEOs and

managers

Policy-

makers

Experts Total

Kenya 4 5 2 2 13

South

Africa

4 3 3 2 12

US 2 - 2 - 4

India 8 - 1 - 9

Total 38

Four rounds of data collection were carried out for this study. First, one of the

researchers conducted an explorative field trip in Kenya in 2012 to study the local

outsourcing industry and IS in particular. Service providers in Kenya were among the

first to adopt IS models. In Kenya, 13 semi-structured interviews were conducted with

ISSPs and policy-makers. Interview questions centered on founding conditions,

entrepreneur’s background, the scope of services, targeted IS staff, client-seeking

strategies, employment and training practices, growth strategy and major managerial

challenges. Following the replication logic (Yin, 2008), two similar rounds of data

collection were conducted in South Africa and India. We thereby ensured to increase

variety of cases along two core dimensions: level of domestic competition and

background of entrepreneur, in order to increase the analytical value of our findings

(Yin, 2008; Eisenhardt and Graebner, 2007), while also conducting sufficient similar

case studies in each category to increase validity of findings (Yin, 2008).

More specifically, as for the second round of data collection, in 2013, we

selected the context of India, in which the level of domestic competition for client

165

projects is much higher than in Kenya. We also made sure to include ISSPs that were

founded by domestic or regional entrepreneurs, as well as those founded by

entrepreneurs with an international background. Overall, one author conducted 9

interviews with Indian providers, policy-makers and representatives of the Indian

business association NASSCOM Foundation. Third, between 2013 and 2014 we

conducted two interviews with the Rockefeller Foundation to triangulate some of the

impact sourcing specific trends and practices. The fourth round of data was collected

in South Africa, a context that showed in many ways similarities to the context of

Kenya, in terms of the degree of mainstream competition, especially when compared

to highly competitive places such as India or the Philippines. Overall, 13 interviews

were conducted with mainstream service providers and ISSPs, training institutes and

the Rockefeller Foundation. Additional interviews with mainstream service providers

helped us further contextualize challenges of ISSPs.

Table 9 Summary of cases

Firm, Country Main Clients,

(Type/Nature of

Clients)

Services

Provided

IS Model/Practices,

International

exposure of

entrepreneur

(high/low)

Invincible

Outsourcing,

South Africa.

Domestic/regional

civic governments,

domestic telecom,

financial service

clients.

International

companies

operating in South

Africa.

Voice support,

back office

support,

transcription.

Work for study

model. Employs

students attending the

Maharishi Institute

graduate programs;

students get fee

waiver/living

expenses.

International

exposure- low

166

iMerit, India International:

Travel portals,

NGOs, Publishing

Houses

Domestic:

Publishing

Houses,

Image tagging,

content

digitization,

digital

publishing,

global help

desks (back

office tech

support), social

media

marketing,

online content

moderation etc.

Recruits and trains

rural and urban

youths (from

marginalized

communities) with

the help of its sister

NGO. Upskills and

employ them in high

value assignments.

International

exposure- high

OTRA, India Domestic:

Regional telecom,

banking, insurance

and retail

companies,

government

agencies.

Voice and non-

voice services.

Data and

accounts

processing,

digitization,

customer care,

inbound and

outbound voice

services,

technical help

desks etc.

Rural outsourcing

company providing

employment

opportunities to rural

youth. Subcontractors

to other major

outsourcing

companies.

International

exposure- low

Craft Silicon,

Kenya

Domestic,

international;

banking industry

specific

IT Services,

BPO services

including data

services.

Recruits from urban

slums while

maintaining a non-

beneficiary work

force. Employees for

client facing roles are

based out of India,

while main operation

for BPO services

located in Kenya.

International

exposure- high

DesiCrew, India Domestic and

some international

clients.

Data

management,

digitization,

content

management,

machine

learning and

Operates out of

multiple rural

locations in India;

employs people from

disadvantaged groups

and provides partial

fee reimbursement

167

lead generation

for clients.

for continuing

education.

International

exposure- low

HaRVa, India Domestic;

educational

institutes and

government

departments

Data

management,

digitization and

call centers in

regional

languages.

Rural BPO model for

employment

generation. Also runs

a microfinance

program that

provides loan to the

employees

International

exposure- high.

B2R, India Primarily domestic

clients; publishing

house, financial

and legal services,

B2B portals etc.

E-Publishing,

Web research,

data

management,

back office

services.

Opened delivery

centers in a remote

state with no

IT/outsourcing

industry; 33% of

PAT reinvested in the

community.

International

exposure- high

(founder previously

employed in

multinational

outsourcing

company).

Rural Shores,

India

Domestic clients-

telecom, insurance

and financial

services, local

governments

Digitization,

corporate

services, IT

help desk etc.

Profit sharing model

with rural

entrepreneurs, tie up

with community

organizations for

recruiting.

International

exposure- low.

Vindhya E-

Infomedia, India

Domestic clients-

public offices and

utility companies,

mainstream

Digitization,

customer

service desk,

data

management.

Employs mostly

people with

disabilities,

recruitment based on

referrals.

168

outsourcing

companies.

International

exposure- low.

Digital Divide

Data (DDD),

Kenya

International and

domestic. Clients

include publishing

houses, public

universities etc.

E-publishing,

digitization and

content

management

(domestic and

international

clients), field

research and

product

marketing.

DDD operates its

delivery center out of

Nairobi, employing

youths hailing from

urban slums,

economically weaker

sections etc. and

some of who are

pursuing college

degrees along with

their full-time jobs;

International

exposure- high.

Jindal

Foundation/Jindal

Software, India

Domestic clients;

mainly data

conversion and

content creation

for local

businesses.

Data

conversion,

content creation

and

management.

Part of the

Foundation of a

mining company

operating in rural

India. Provides

livelihood for people

near the mining

villages.

International

exposure- low.

For data analysis, we cross-tabulated interview responses across ISSPs. First,

we focused on comparing key properties of ISSPs, such as founding conditions, the

background of the founders and executives, types of business services provided, target

employees, major clients and their location. We provide a selective overview of these

features in Table 9. Second, we coded interviews inductively and derived two major

strategic foci of ISSPs – related to whether they prioritize the social mission or

business opportunities, and whether they target international and domestic, or only

domestic clients. We then analyzed the internal organization of ISSPs finding that

169

social mission and business operations are either decoupled or integrated, and that

ISSPs either focus on routine low-cost and low-skilled services, or on higher skilled

and differentiated services. Third, we interrelated these dimensions thus specifying

four major business model configurations. Fourth, finally, we promoted analytical

generalization (Yin, 2008) by developing theoretical propositions around the core

antecedents of each business model configuration. Specifically, we focused on how

international or domestic background of the entrepreneur, and high or low levels of

domestic competition respectively, affect strategic focus and how the latter affects

operational implementation. We elaborate on these propositions in the discussion

section.

Findings

Overview of cases

We first give a descriptive overview of the ISSPs we included in our study and

some of their major properties, including country of origin, main clients served,

services provided and their approach towards benefiting the local community (Table

9). We included in our sample ISSPs from India, Kenya and South Africa. All of them

identify as hybrid organizations in the sense that they combine a market serving

business model with a social mission. Business services provided by the ISSPs

include voice services (e.g. call center operation, customer support, and technical

helpdesk services to end users of their clients) and non-voice services (e.g.

digitization of records, e- publishing and web content management). Some service

providers like Craft Silicon and iMerit also offer IT (Information Technology) support

services. Overall, the nature of the tasks performed by employees include system-

intensive tasks (e.g. data entry), routine tasks (e.g. low-cost tasks like data

170

conversion), people-intensive tasks (e.g. Call center operation) and creative tasks

(e.g. software development and support services). ISSPs in our sample serve a variety

of business clients – both domestically and internationally. Business clients range

from regional firms to philanthropic foundations, universities and international banks.

For example, DDD Kenya provides e-publishing and digital conversion services to

Harvard University library (client).

The social mission across all ISSPs focuses on hiring and training staff from

disadvantaged backgrounds, e.g. physically handicapped, youth from urban slums or

rural areas (see for specifics, Table 9). As part of the social mission, ISSPs not only

hire and train disadvantaged staff, but also get engaged in the communities they hire

from. For example, Craft Silicon operates a mobile software training bus in one of the

largest urban slums in Nairobi as a way to make an impact in the community, while

also being able to screen talent and select future hires. However, most ISSPs employ a

mix of beneficiary and non-beneficiary employees, i.e. staff that would easily find an

equivalent job at a mainstream outsourcing firm. In combination, ISSPs generate

value by 1) offering employment and skill development opportunities to beneficiary

(disadvantaged) employees and by 2) offering low-cost business process outsourcing

(BPO) services to business clients at quality and service levels that are comparable to

mainstream, urban BPO companies. In some cases, ISSPs employ non-beneficiary

staff, especially in supervisory roles, with an opportunity to make a difference in the

community. Interestingly, as we detail below, while all the ISSPs we analyzed

claimed to be social enterprises, not all shared the same enthusiasm to convey this

information to their clients. Also, some ISSPs recruit lateral hires from the industry to

171

manage the client interface while beneficiary employees, who often had neither high

school education nor prior experience, work behind the scenes, partly as a response to

the various degrees of client responsiveness to the social mission of the organization.

We discuss this interesting finding in more detail below.

Furthermore, we find that ISSP founders have varied professional (work,

educational etc.) experiences, ranging from first-time entrepreneurs, with very little

prior work experience, to highly experienced entrepreneurs, most of whom had

international exposure as well, mostly in the U.S. Some of these international

founders and their executives were associated with international philanthropic

foundations (e.g. Clinton Foundation, Gates Foundation, Action Aid etc.) and other

development networks. Unlike domestic entrepreneurs, international entrepreneurs

often found it easier to establish connections with international clients due to prior

association or were viewed favorably by funding agencies. To overcome this

disadvantage, many domestic entrepreneurs would initially opt for sub-contractual

relationships with mainstream outsourcing companies etc. As for financing strategies,

some ISSPs would rely on either local funding sources, or global supporters like the

Rockefeller Foundation, which helped defray initial investments and employee

training.

Four Main ISSP Business Model Configurations

One of our main findings is that ISSPs in our sample cluster into four main

business model configurations which are similarly prevalent. We label them the

‘professional’ (P), the ‘socially responsible’ (S), the ‘developmental’ (D) and the

‘opportunistic’ (O) model. While all share main features of impact sourcing, i.e. the

172

provision of services to business clients while supporting local communities by hiring

and training beneficiary staff, they differ along important dimensions.

Specifically, they differ in two main strategic and two main operational ways.

Strategically, two of the models (P and S) target both international and domestic

business clients, whereas the other two models (D and O) target only domestic clients.

For example, DDD (P) serves both domestic and international publishing houses and

universities, whereas HaRVa (D) serves only domestic clients, e.g. educational

institutes and government departments. At the same time, two of the models (P and D)

prioritize the social mission in core decisions, such as growth, whereas the other two

models (S and O) prioritize business opportunities. For example, whereas the

founders of both DDD (P) and HaRVa (D) started the ISSP based on a social mission,

the founders of Invincible Outsourcing (S) and OTRA (O) were mainly driven by

business and funding opportunities. Operationally, Models P and D, which prioritize

the social mission, typically focus on differentiated, higher-skilled services, whereas

Models S and O, which prioritize business opportunities, focus on low-cost, low-

skilled services. For example, DDD (P) trains beneficiary staff in sophisticated e-

publishing and market research, whereas OTRA (O) focuses on rather standardized

helpdesk services. Finally, Models P and S, both of which target international and

domestic clients, typically decouple business operations and social mission, whereas

Models D and O, which target only domestic clients, integrate them. For example,

iMerit (P) and Invincible Outsourcing (S) use specialized community partners to help

with part of the screening and hiring of beneficiaries, whereas HaRVa (D) and OTRA

(O) organize hiring themselves. Overall, we consider the P-Model (e.g. DDD) to be

the most sophisticated in terms of client range and skill level, whereas the O-Model

173

(e.g. OTRA) is the least sophisticated in focusing on routine services for domestic

clients only. The other models are in between: the S-Model (e.g. Invincible

Outsourcing) has highly professional delivery but focuses on routine tasks; the D-

Model (e.g. HaRVa) has differentiated services but focuses on domestic clients. Table

10 gives an overview of all models.

Table 10 Dominant Business Model Configuration of ISBHs

d -Decoupling of social mission and business operation

i -Integration of social mission and business operation

h -Focus on offering differentiated (higher-skilled) services

l - Focus on offering low-cost (lower-skilled) services

Strategic

Focus

Prioritizing social

mission

Prioritizing business

opportunities

International and

Domestic Clients

(P)rofessional

(d, i)

Example: iMerit, DDD,

CraftSilicon

Sophistication: High

(S)ocially Responsible

(d, l)

Example: DesiCrew,

Invincible Outsourcing

Sophistication:

Medium

Domestic Clients

Only

(D)evelopmental

(i, h)

Example: HaRVa, B2R

Sophistication: Medium

(O)pportunistic

(i, l)

Example: Vindhya,

OTRA, JindalSoft,

Rural Source

Sophistication: Low

Dominant

Business Model

Configuration

174

Next, we analyze in detail why these four models have established themselves

as viable options in the impact sourcing space. We elaborate what is driving the

emergence of each configuration, specifically in terms of the role of founders’

background and intensity of domestic competition for client projects, and how each

strategic choice translates into certain implementations. We thereby introduce the

notion of liability of embeddedness (LOE), which explains to a great extent why

certain strategic foci are selected in the first place, and also how models with a certain

focus are implemented in certain ways.

Founder’s Background, Social Mission Focus and Service Portfolio Choice

We find that one major driver of the differentiation of ISSP business model

configurations is the background of the founder. Examining the work history of the

social entrepreneurs who founded the ISSPs and/or the executives who manage the

current operations, two main scenarios become apparent – (1) they either had

significant years of international professional experience (‘international

entrepreneurs’) or (2) they were domestic entrepreneurs with no significant

international exposure (‘domestic entrepreneurs’). Typical ISSP examples of (1) are

iMerit, DDD & HaRVa; of (2) are OTRA, Invincible Outsourcing & Vindhya E-

Infomedia. Social entrepreneurs with an international professional background, given

their accumulated business connections, have a greater range of opportunities

compared to domestic social entrepreneurs. We see the former as social entrepreneurs

‘by choice’ and the latter as social entrepreneurs ‘by condition’. We now explain this

difference in greater detail.

Social entrepreneurs with an international background identify both social and

commercial opportunities as a result of their experiences and connections to

175

professional networks abroad, including connections to philanthropic foundations,

academia etc. An executive of iMerit described how the founders deliberately chose

to set up a social enterprise in India based on their involvement in a US-based study:

“Our founders Dipak and Radha had been tech entrepreneurs in Silicon

Valley; they were associated with the ActionAid – Stanford (University) survey

and economic assessment of rural West Bengal. During the survey, when they

asked somebody, “do you want better education?” they were told- “what we

don’t have are jobs.” And that’s how Radha and Dipak pioneered this whole

IT livelihood model.” (Executive, iMerit).

Once they identify a social and commercial opportunity, these entrepreneurs

are able to build management teams, establish partnerships etc. quickly. A Kenyan

executive described why she found herself the best candidate to co-found and run the

social enterprise in her home country:

“I was working at the Bill and Melinda Gates Foundation in Seattle. I had a

colleague who said he started this company in Cambodia and Laos. He told

me that they were interested in starting in Kenya, and asked me if I could give

them any advice. My main advice was that I think I would be a good person to

actually set up the company”. (CEO, DDD Kenya).

By contrast, most domestic social entrepreneurs are driven by “perceived

desirability” (Mair and Noboa, 2006) of a particular venture. In other words, when

starting the ISSP they feel that a social business model is the right approach to run, for

example, a rural outsourcing enterprise in their social context. In doing so, however,

both their internal motivation (e.g. personal values) and external motivations (e.g.

encounter with the social problems like largescale unemployment) play a role as well:

176

“I think this is a marketing strategy for some (service providers), to call

yourself as a rural player… of course you are creating an impact in the rural

place and people are getting jobs. I’ll tell you about the effects (economic

benefits) which happened to the people in our place (due to the employment

opportunities).” (Founder, OTRA).

The founder of yet another ISSP, while assisting at her mother’s primary care

clinic, came into contact with disabled people who couldn’t find jobs in the service

sector in Bangalore. This experience prompted her to found an ISSP employing

disabled people:

“She (the founder) wanted to do something on her own. She initially started a

small desktop processing office with two employees. When some (disabled)

people approached her for a job, she realized these are people who do not get

a job otherwise. Then she started this organization. (Executive, Vindhya).

Importantly, however, returning entrepreneurs with significant prior

international experience would have a wider range of opportunities prior to starting

the ISSP compared to domestic social entrepreneurs whose recognized opportunity

space would be much smaller. Therefore, the decision of international entrepreneurs

to operate an ISSP from India or Kenya can be considered a deliberate location choice

driven by an explicit social mission focus:

“I used to be a banker, used to do consulting work in the U.S. We were

constantly trying to increase market shares by selling to consumers…..We

were trying to sell toothpaste to people who didn't have food to eat. Working

with Citi, I was thoroughly disillusioned. You've been hearing this, you

177

…eradicate poverty. You can’t eradicate poverty by giving out 20 rupees. You

can eradicate poverty by giving employment.” (Founder, HaRVa).

By comparison, in the case of domestic social entrepreneurs, aside from their

personal motivations, startup decisions would be highly influenced by local

opportunities (and constraints). For example, access to start-up capital is often linked

to government policies promoting the set-up of social enterprises. In other words, in

the case of local or domestic entrepreneurs, the decision to set up an ISSP is typically

much more business opportunity-driven (rather than social mission driven):

“She (founder) was working in a media agency. And she wanted to pursue

something different. Once she happened to hear a lecture by Prof.

Jhunjhunwala (Indian academic in the field of technology innovation). She

made a decision to quit the job and join as a research associate under his

mentorship. She had no knowledge of Rural BPO at that time. She had

interviewed a lot of people as a part of a project. The idea of connecting

technology, rural space and a business model occurred as a result of the

findings of this project.” (Co-founder, Desi Crew).

The focus on either business opportunity or social mission has important

implications for how the ISSP is run. Social mission-driven ISSPs have a higher

tendency to train their beneficiary workforce and upgrade their skills. For example,

DDD has been training hearing-impaired staff in data conversion and content

digitization. They also encourage employees to pursue college education and provide

flexible working hours. This emphasis may benefit the employees in giving them

greater career options, including the opportunity to gain a college degree, as well as

the larger community, in developing role models and in qualifying employees to

178

potentially train others in the community. At the same time, ISSPs can employ higher-

skilled beneficiary staff for high-end services for business clients, differentiating

themselves from other providers. For example, social mission-driven ISSPs like DDD

and iMerit developed their own cadre of specialized skills as part of professional

training. The manager from a social mission-driven ISSP explained the dual

advantages of training the workforce in specialized skills as follows:

“The more capable these people are in terms of building skills, the better

service they’ll provide to our clients; they will also be able to find a (another)

job tomorrow. They have a career now.” (Executive, iMerit, India).

By contrast, business opportunity-driven ISSPs typically focus on low-cost

routine tasks which require minimum investment in workforce development and

training. As mentioned above, their main motivation to run an ISSP is grounded in

entrepreneurial and funding opportunities in a particular region, e.g. a rural context in

India. As long as funding criteria are met, business opportunity-driven (mostly local)

entrepreneurs are unlikely to make special investments into career paths of

beneficiary staff. Not only do they often lack the motivation to do so, but they often

lack the experience or skill required. As a result, whereas social mission-driven

entrepreneurs frame the setup of an ISSP as an opportunity to serve a specific social

or developmental need, e.g. training hearing-impaired youth, business opportunity-

driven founders typically consider the limitations of beneficiary staff as a constraint

they cannot do much about. This constraint, in turn, affects their ability to serve

particular business client markets. For example, this manager mentions that her

employees have not been trained in English language and hence the ISSP prefers not

to serve international clients or provide higher end tasks.

179

“We normally work only with domestic clients; we do not do calling (call

center) work for U.S. clients…. You cannot expect a Sita to become a Susan

and talk in their language and we’re just not there. These people have been

trained to understand the customers’ query in the local language, not in

English right now.” (Manager, Rural Shores, India).

To illustrate the difference to social mission-driven ISSPs, let us consider DDD. A

large proportion of their staff are hearing-impaired and hence also unable to provide

any voice services. However, unlike Rural Shores, DDD would invest into higher-end

skill sets, such as data analysis and market research, which do not require voice.

Prioritizing staff development is a main distinguishing driver. As a side effect,

training hearing impaired staff in higher-end skills also positions DDD to potentially

target international clients while avoiding mainstream competition in the ‘voice’

services space. However, as we detail below, the choice to target international vs.

domestic clients is also affected by another important contingency: level of domestic

competition for client projects.

In sum, level of international professional experience of the entrepreneurs

affects whether founders are social mission-driven or business opportunity-driven in

starting an ISSP, which, in turn, affects how much they invest into training and

developing beneficiary staff, resulting in either focusing on lower cost/ low skilled

services (Models S and O) or differentiated/high skilled services (Models P and D). It

is critical to note that both strategic and operational directions can be viable options,

which is why they co-exist in their respective business model configurations among

ISSPs.

180

Domestic Competition, Target Client Market, and Social-Business Integration

A second major driver of the differentiation of ISSP business model configurations is

the level of domestic competition for business client projects, and the resulting choice

of target client markets. We observed that ISSPs, in terms of their target business

clients, either include (1) both international and domestic clients, or (2) only domestic

clients. Typical examples of (1) are Craft Silicon, iMerit, DD; of (2) are Rural Shores,

HaRVa, B2R etc. We further found that the global economic positioning of the

country they operate from, and the related level of domestic competition for client

projects is a main driver behind the choice of target client markets. The latter, in turn,

affects the way ISSPs are structured internally, specifically the degree to which

business operation and social mission are integrated or decoupled.

Our data suggests that in a country like India, where the outsourcing industry

is highly developed, international clients tend to favor established mainstream service

providers with whom they have ongoing professional relationships. Competition for

client projects among new outsourcing firms is fierce, and client expectations of

service quality, scale and professionalism are high. As a result, entrance barriers for

the international client market are relatively high. In other words, especially coming

from highly developed outsourcing destinations, ISSPs – like other new international

ventures – suffer from liability of smallness and newness (Freeman et al., 1983; Singh

et al., 1986; Carroll, 1983) when facing international clients. The executive of an

ISSP operating out of India illustrates this point:

“If TCS BPO Service (large Indian service provider) make a mistake, they

(client) would say, “yes, they made one mistake, but we have such a large

account with them. We’ll continue with them for the project delivery.” If we

181

make a mistake in our initial sample, that can be the end (of the professional

relationship).” (Executive, iMerit, India).

By comparison, ISSPs from Kenya for example do not face the same level of

domestic competition. Many of their local peers are similarly small, and many

international clients are aware about the cost and scale limitations of African

providers. This in turn lowers the barrier to entry to international client markets,

relative to domestic peers. The following quote from a Kenyan ISSP’s CEO

demonstrates this point:

“.…where would I compare Kenya to, I would say we are not (comparable to)

India and we are not (comparable to) China. We are not of the lowest price

and not with the biggest scale, but maybe we can do well in certain niches….”

(CEO, DDD Kenya).

As a result, a large proportion of African ISSPs have targeted international

client markets from early on, also to reach a more diverse pool of potential clients

(compared to rather limited domestic opportunities), whereas the majority of Indian

ISSPs have focused on domestic business clients. Another important driver of this

choice is what we call ‘liability of embeddedness’ (LOE), which specifically applies

to ISSPs rather than mainstream service providers. All the ISSPs we studied focus

their social mission on particular local communities – urban slums, rural areas, etc. –

within which their social mission is particularly valued. In fact, their embeddedness in

specific communities often gives them exclusive access to an underutilized labor pool.

Also, domestic or regional business clients, who share the same social context, may

appreciate how local ISSPs try to make a difference in the community while

providing valuable services to clients. In contrast, their local embeddedness may turn

182

into a liability when facing international clients many of whom do not share the same

social context. Rather than appreciating the social mission as part of the value

proposition, they may benchmark ISSPs against mainstream competition, especially

when ISSPs come from a global outsourcing hub dominated by mainstream

competitors.

One very good example of this dilemma is the above-mentioned case of Rural

Shores. Whereas local clients may not only ‘accept’ but also ‘appreciate’ the fact that

Rural Shores focuses on hiring local staff that may lack English language skills but

instead speak the local language, international clients may perceive this as a

significant limitation when compared to mainstream providers most of whom

typically hire and train staff with college degrees and standard English language

skills. By contrast, in the case of providers coming from Africa, this potential liability

is somewhat mitigated by the image of ‘Africa’ among many international clients. In

fact, conversely, many international clients would choose an African provider (rather

than an Indian provider) because of the potential development impact such projects

can make in the African context. The Kenya-based ISSP Craft Silicon makes

deliberate use of that image by focusing on serving domestic and international micro-

finance institutions, whose mission is to make an impact in regions such as Africa.

This allowed Craft Silicon to occupy a niche market, while making the hiring from

rural slums a congruent part of their image towards international clients:

“We cannot compete with large scale BPO and financial services

firms….[but] for microfinance, our brand value is very high; any good sized

microfinance or well informed microfinance institution would always know

us” (CEO, Craft Silicon, Kenya).

183

However, we further find that LOE continues to affect strategies and

operations even among ISSPs that successfully target international clients. This is

particularly true for Indian ISSPs that despite fierce domestic competition manage to

acquire international client projects. In order to develop client trust, while mitigating

potential LOE towards international clients, iMerit for example pursues a strategy of

decoupling social mission and business operations to better scale and customize

operations to client needs and to convey a sense of professionalism towards

professional clients, most of whom lack knowledge and appreciation for the social

context iMerit operates in. Organizationally, iMerit has delegated the training of

beneficiary staff from the neighboring rural area to a specialized community

organization, while focusing on advanced client-specific training and hiring of

complementary ‘mainstream’ staff to meet client expectations. On top of that, iMerit

would refrain from even mentioning the social mission when negotiating new client

deals:

“Our goal is to look like a professional organization… After a successful

delivery, we tell our clients, ‘oh by the way check out our website. Some of the

young men and women that we work with are from disadvantaged

backgrounds’. (Executive, iMerit, India).

By comparison, we find that ISSPs that focus entirely on domestic business

clients, typically integrate the social mission with their business operations.

Integration, for example, means that the ISSP would involve beneficiary staff at all

levels rather than attempting a particular division of labor between client-facing and

back office staff. Also, in highly integrated models, most training is typically done in-

house. A high level of integration is promoted by a strong buy-in of local or regional

184

clients who share the value ISSPs create by serving their local community. In case of

supportive clients, ISSPs on their part make sure that the clients are well informed

about their workforce. The following quote from the Executive of Jindal Foundation,

who exclusively works with domestic clients, demonstrates this:

“We tell the clients during initial negotiations itself that our recruitment time

is 15 days for 50 people, and another 3 weeks for training because we don’t

find enough trained people here. We tell them upfront because they also know

the challenges of working with a rural BPO player. At the end of discussions,

we should know the client well and the clients should know us.” (Executive,

Jindal Foundation).

An integrated strategy may also help develop longer-term client relationships

which makes the training of beneficiary staff more feasible, and which is particularly

important for social mission-driven ISSPs. For example, many ISSPs, who target

domestic clients, would involve the clients in training beneficiary employees for

customized projects. By co-creating value with the clients in this way, ISSPs aim to

minimize training costs as well as “sensitize” clients about the social value that they

are helping to create.

In sum, level of domestic mainstream competition for international client

projects and related client expectations affect an ISSP’s choice of target client

markets. High level of competition would typically prompt ISSPs to focus on

domestic clients (Models D and O), which helps ISSPs avoid the challenge of liability

of smallness, newness and embeddedness when facing international clients. When

competition is lower, ISSPs are more likely to target international clients (Models P

and S). However, most ISSPs targeting international clients would decouple business

185

operations and social missions to be more flexible and scalable, while also mitigating

continuous LOE. Specifically, it is a response to the tendency of culturally and

institutionally distant clients to overemphasize the need for professional service

delivery on par with mainstream competition, while often underappreciating the social

value ISSPs create.

Discussion

This study has examined, based on the case of impact sourcing service providers

(ISSPs), how founders’ background and competition conditions affect business model

configurations of social-business hybrids in international contexts (ISBHs). We find

that ISBHs, while sharing certain similarities, also differ in significant ways,

particularly in their business model configurations. We identified four models. The

“professional model” is the most sophisticated configuration. Social mission-driven, it

focuses on higher-skilled differentiated services for both domestic and international

clients.

Professionalism is partially accomplished by decoupling critical business

operations from various aspects of the social mission. In contrast, the “opportunistic

model” is the least sophisticated one. It is business opportunity-driven and targets

only domestic clients, focusing on low-skilled, low-cost services, thereby integrating

business operations with the social mission. The other models are combinations of the

two: the “socially responsible model” is business opportunity-driven and focuses on

low-cost, low-skilled services but targeting both domestic and international clients.

The “developmental model” is social mission driven and focuses on differentiated and

higher-skilled services, but targets only domestic clients. Next, we deconstruct each

configuration and develop a two-stage model (see Figure 6) that explains how the

186

internal organization of each business model configuration is a function of strategic

focus, and how strategic focus is a function of both industry-level and individual-level

drivers.

187

Figure 6 Two-stage model explaining emergence of four ISBH business model

configurations

188

One core finding relates to the influence of the founder’s international

professional background on the tendency to either prioritize the social mission or

business opportunities (stage 1), and the influence of prioritizing social mission or

business opportunities on the internal organization of the ISBH (stage 2) (see Figure

6). Similar to research on commercial international ventures (e.g. Saxenian and Hsu,

2001; Saxenian, 2005) we find that founder’s international background matters. Yet

our findings go beyond and partly question prior research. For example, prior studies

have argued that returnee entrepreneurs, i.e. home-based entrepreneurs with

educational and/or professional experience abroad, often perform better than firms

founded by domestic entrepreneurs. This is because returnees often possess superior

technological and commercial knowledge, while also being aware of local institutions,

policies and opportunities (Kenney et al., 2013), and because they have established

connections to international business networks (Dai and Liu, 2009; Wang, 2015; Kerr,

2008; Jaffe and Trajtenberg, 1999; Saxenian, 2002). In other words, international

experience often translates into social capital (Adler and Kwon, 2002; Graham, 2012)

that can be a strong predictor of location (and market) choice of diaspora

entrepreneurs (Zaheer et al., 2009). In contrast, we do not see this in our data. In our

study, both domestic and international entrepreneurs seem to be able to implement

viable business models, and the choice of client market seems to be a function of

competitive conditions rather than the entrepreneur’s background (see below).

However, we do find that international vs. domestic background matters in a

founder’s motivation to start a social enterprise in an international business context,

and in making a social community impact. Some prior studies suggest that diaspora

189

entrepreneurs’ decisions to invest in their home countries can be motivated by

emotional satisfaction and social recognition (Riddle et al., 2010; Gillespie et al.,

1999; Nkongolo-Bakenda and Chrysostome, 2012), and that diaspora entrepreneurs

are willing to invest in risky or small markets, as they are driven by altruistic

considerations (Gillespie et al. 2001; Aharoni, 1966). Yet, other studies suggest that

firms owned by diaspora entrepreneurs do not exhibit significant differences in their

pro-development behavior and social responsibility when compared to other firms

(Graham 2014). Our findings suggest that founders of ISSPs with either a diaspora or

foreign background are typically very social-mission driven; their motivation to run a

social enterprise is primarily driven by their aspiration to make an impact in the

community. This can be explained by their motivation to ‘give back’ after making a

career abroad (Riddle et al., 2010; Gillespie et al., 1999), but also by the fact that,

among the range of business and location opportunities open to internationally

experienced entrepreneurs, they deliberately choose to start a social enterprise in a

developing country.

In contrast, we find that so-called ‘domestic entrepreneurs’, who have little

international exposure and experience, are much more business opportunity-driven

when starting an ISBH. This is because domestic entrepreneurs are initially much

more constrained in their recognition of opportunities and choices than international

entrepreneurs. Especially in the context of developing countries, tapping into social

funding is a very pragmatic opportunity to start a business. In fact, social funding may

be a very integral part of the business system they operate in (Whitley, 1992). Every

system has unique competitive conditions and opportunity structures. In African

countries, for example, foreign aid agencies and NGOs take the role of a ‘supporting

190

industry’ for many businesses, so that many start-ups are incentivized to meet certain

‘social requirements’ to be eligible for funding (see also Manning et al. 2017). We

thus hypothesize that domestic and internationally experienced social entrepreneurs

are likely to differ in their motivation and overall orientation in starting and running

an ISBH:

P1: Social entrepreneurs with high international professional experience

(“international entrepreneurs”) are likely to be social mission-driven when

starting ISBHs in developing countries, whereas social entrepreneurs with low

international professional experience (“domestic entrepreneurs”) are likely to

be business opportunity-driven when starting ISBHs in developing countries.

We find that the orientation of social entrepreneurs towards pursuing social

missions vs. business opportunities matters in how they allocate resources and the

extent to which they invest into a business model that benefits communities. In the

context of ISBHs in general, and ISSPs in particular, our findings suggest that the

different degrees of commitment to benefitting communities are reflected in the

choice of products and services ISBHs provide (see Figure 6).

Domestic entrepreneurs, whose choice of starting an ISBH is mainly business

opportunity-driven, are mainly interested in entering a potentially growing business,

here global outsourcing, while limiting upfront investments and risks. In the context

of ISSPs, we find that their decisions about service offerings are influenced by what

established peers are already offering, and what requires the least initial investment in

training and skill development. We find that opportunity-driven entrepreneurs – in the

context of developing countries – consider hiring and training of staff from

disadvantaged communities mainly as a ‘constraint’. To accommodate these

191

‘limitations’, such ISBHs would focus on offering low-cost, routine services. Also,

domestic entrepreneurs are often neither interested in benefitting communities beyond

meeting funding criteria, but they also lack the skills to do so.

By contrast, international entrepreneurs, who are typically very social mission-

driven when starting their ISBH, link their business model more closely to the needs

and opportunities of the community they seek to benefit. Prior research has shown

how social enterprises focusing on workforce development typically make sure that

beneficiaries acquire training and skills that makes them competitive – beyond their

initial employment (Battilana et al., 2015). Similarly, rather than seeing the initially

limited skill set of impact sourcing staff as a ‘constraint’, social mission-driven ISBHs

in our dataset see it as an ‘obligation’ to provide training and skill development that

qualifies staff towards higher-skilled work while accommodating for potential

limitations. For example, the ISSP DDD trained impaired staff in sophisticated

document analysis and market research that makes full use of their cognitive

capabilities while accommodating for their inability to hear and speak. Thus, ISBHs

in developing countries that are strongly social mission-driven are likely to offer

higher-skilled differentiated services. We propose:

P2: ISBHs in developing countries whose founders are social mission-driven

are likely to focus on offering higher-skilled differentiated products and

services, whereas ISBHs in developing countries whose founders are business

opportunity-driven are likely to focus on lower-skilled low-cost and routine

products and services.

Our second major finding relates to the influence of the intensity of

mainstream domestic competition for client contracts on the choice of entrepreneurs

192

to either target both international and domestic, or only domestic clients (stage 1), and

the influence of target client markets on the choice to either integrate or decouple

social mission and business operations (stage 2) (see Figure 6). One core insight is

that level of mainstream competition influences which business clients ISBHs target.

For example, India is a highly competitive space for starting a new outsourcing firm.

Not only do international clients have a wide range of service providers to choose

from, but expectations in terms of professionalisms and process standards are very

high (Athreye, 2005; Ethiraj et al., 2005). On top of this, global clients are typically

detached from the social context ISBHs operate in, which means their appreciation for

the social mission may be very limited. In other words, ISBHs may face a liability of

embeddedness (LOE): whereas in a shared domestic context, the social mission may

‘enhance’ the value proposition of ISBHs, outside of this context it may ‘endanger’ it,

since clients may primarily put trust into the business capacity of the provider. For

example, we find that Indian ISSPs would need to run pilot projects with international

clients first to gradually establish trust. As a result, many ISSPs avoid competing for

international client contracts and instead focus on serving domestic clients. The

unique advantage of focusing on the domestic market is that competition is typically

less fierce (since domestic contracts are less lucrative) and that domestic clients share

the institutional and social environment of ISBHs and potentially sympathize with the

social mission of ISBHs more than international clients would. Sharing the same

social and institutional setting thus turns embeddedness into an asset, and makes the

targeting of clients more feasible.

In contrast, we find that ISSPs operating out of Africa are much more likely to

also target international clients. This can be explained by the fact that Africa is a

193

business context where mainstream competition for ISBHs in the outsourcing industry

is less intense (Abbott 2013). Business practices and norms – both towards domestic

and international clients – are much less established (see in general Porter, 1990). As

a result, international clients are less pre-conceived with expectations about

mainstream or hybrid competitors from the same region. In fact, in the case of impact

sourcing, international clients often deliberately choose to outsource work to a region

such as Africa either to lower costs or to signal their interest in combining business

decisions with social impact (see also Manning et al., 2017). Our findings correspond

with prior research suggesting that for example Kenya, due to its legacy as a

‘development hub’, often attracts projects from international business clients with an

interest in supporting economic development beyond a pure business logic (Manning

et al., 2017). In other words, operating from a less developed region lowers LOE for

ISBHs towards global clients, because the latter would not benchmark ISBHs against

mainstream competitors. This in turn makes the targeting of international clients much

more feasible for ISBHs operating from less developed regions. We hypothesize:

P3: ISBHs that are founded in countries with a highly developed mainstream

industry are likely to target only domestic clients, whereas ISBHs that are

founded in countries with a little developed mainstream industry are likely to

target both international and domestic clients.

We further find that the targeted client market affects the degree to which

social mission and business operations are either integrated or decoupled. Prior

research has found that ISBHs differ in terms of their level of social-business

integration (Battilana and Lee, 2014; Battilana & Dorado, 2010), whereby pace of

growth seems to play a key role in the tendency to switch from more integrated to

194

more decoupled models (Kannothra et al. 2017). We find that in the context of ISBHs

another important factor is critical – whether ISBHs target domestic or international

clients. Again, like in the case of choosing target clients, LOE becomes a key driver in

how ISBHs manage client relationships.

In cases where ISBHs mainly serve domestic clients, ISBHs tend to integrate

business operations and social missions. In such cases, ISSPs typically undertake

most of the staff training themselves and organize operations and workforce design

such that needs of beneficiaries are directly accommodated. This approach is

supported by domestic clients caring about the social mission of the ISBH. Often,

clients are invited to visit operations and appreciate efforts made to train and integrate

beneficiaries, making the social mission an integral part of the value proposition. By

contrast, ISBHs that mainly serve international clients typically decouple business

operations from social missions. Prior research has argued that especially those social

enterprises that aspire to grow fast (Jay, 2013; Kannothra et al., 2017) or whose

beneficiaries and (business) clients are separate entities, such as Work Integration

Social Enterprises (Battilana et al., 2015; Pache and Santos, 2013), are likely to

separate business operations from social mission. However, we find that choosing to

work for international clients makes the choice to decouple social missions from

business operations even more likely. This is because international clients typically

compare hybrid enterprises with mainstream competitors in terms of their ability to

deliver high-quality products and services. Even if clients accept the social mission as

part of the value proposition, their expectations in terms of standards and

professionalism remain high (Kannothra et al., 2017), inferring that the social

orientation may be perceived as LOE. One key approach to reduce LOE is to

195

decouple social mission and business operations, and run the latter similar to

mainstream competitors. This approach is needed less when targeting domestic clients

who share the social context of ISBHs. We hypothesize:

P4: ISBHs in developing countries that target both international and domestic

clients are likely to decouple the social mission from their business operation,

whereas ISBHs in developing countries that target only domestic clients are

likely to integrate the social mission with their business operation.

Our findings also suggest that LOE presents itself as a challenge differently

depending on whether social entrepreneurs and the ISBHs they run are social mission-

driven or business opportunity-driven. On the one hand, it can be assumed, and our

data confirms it, that highly social mission-driven entrepreneurs are less likely than

business opportunity-driven entrepreneurs to compromise on their social mission

when preparing to target business clients outside of their social context, i.e. when

facing LOE. For example, we show how ISSPs like DDD, Craft Silicon and iMerit

continue to invest into their beneficiaries even if, like in the case of iMerit in

particular, international clients lack appreciation for the social mission they pursue.

On the other hand, we also find that in particular social mission-driven ISSPs are

typically more prepared than business opportunity-driven ISSPs to invest into

infrastructures that help mitigate LOE while being able to maintain the social mission.

This is because, as we find in our data, social mission-driven entrepreneurs are

typically those with extensive international professional experience prior to starting

the ISSP. This experience gives them the toolset to either target international clients

that may sympathize with the social mission or develop organizational solutions that

196

reduce LOE by reducing the tension between social mission and business viability.

One good example is Samasource, a highly social mission driven ISSPs, which has

established an international network of partnerships with community organizations

that help pursue locally embedded social missions while freeing capacity to develop

highly professional business services for clients (Gino and Staats, 2012). In other

words, our findings indicate that in particular ISBHs implementing the most

sophisticated configuration – the ‘professional’ business model – are also likely to

engage most extensively in both facing and managing LOE. We encourage future

research to pay special attention to this group of ISBHs.

Implications

Our study has major implications for future research. We inform research on

social enterprises by enhancing our understanding of antecedents and contingencies

surrounding the establishment of international social ventures (Zahra et al., 2008), and

inform international business research by elaborating on strategies and contingencies

of targeting and managing international clients in the context of ISBHs, including the

notion of liability of embeddedness (LOE).

First, with respect to antecedents and contingencies of implementing

international social ventures, scholars have focused on how dual social—business

goals that are embedded within hybrid organizations can cause tension (Battilana and

Dorado, 2010; Battilana et al., 2015; Mair et al., 2015; Smith et al., 2013). Others

have separately examined business models of hybrid organizations operating in

international contexts (e.g. Bocken, et al., 2014; Seelos & Mair, 2005; Yunus et al.,

2010; Desa and Kotha, 2006; Desa, 2012). Yet we have lacked an understanding of

the ways in which hybrids implement ‘hybrid models’ in international contexts. Our

197

study has emphasized the emergence of different configurations of hybrid business

models in international contexts and their antecedents. We thereby link the discussion

on the potential tension between developing professional business products and

services, and pursuing a social mission, to the specifics of operating in international

contexts. For example, our findings suggest, beyond previous research on hybrids,

that targeting international (rather than only domestic) business clients potentially

increases the tension between social and business objectives, since international

clients, especially when occupying powerful positions in global supply chains, have

high bargaining power towards their suppliers, thus expecting ISBHs to match regular

competitors in professionalism, and quality and cost of services rendered.

We find that ISBHs employ two potential strategies to mitigate this tension.

As a first strategy, ISBHs may choose whether they want to compete for international

clients in the first place, which exposes them to liabilities of embeddedness towards

mainstream competitors, or whether they focus mainly on domestic clients. In the

latter case, their embeddedness in the local social context may turn into an asset and

potential source of competitive advantage compared to both mainstream domestic and

international competitors, since domestic clients may more easily buy into the social

mission of the ISBH. As a second strategy, ISBHs may choose to compete for

international client projects but apply the well-known strategy of decoupling of

business operations from social missions (Battilana & Dorado, 2010) to convey their

professionalism towards business clients without losing sight of the social mission.

Relatedly, unlike prior research on SBHs in general and ISBHs in particular

(e.g. Jay, 2013), our findings challenge the view that social-business tensions either

get resolved in favor of or against the social mission (i.e. ‘mission drift’). Instead, we

198

show that first of all ISBHs can be more or less social mission-driven in the first

place, which is partly related to the background and perceived opportunity space of

the entrepreneur, especially in developing countries. Second, we show that ISBHs can

choose from a variety of configurational options that help manage social-business

tensions in viable ways. We encourage future research to further investigate such

hybrid options within international business contexts.

Second, we inform international business research by elaborating on strategies

and contingencies of targeting and managing international clients for ISBHs. In

international business research, it has long been established that firms targeting or

entering foreign markets need to overcome various liabilities compared to domestic

competitors – liability of foreignness (Zaheer, 1995), newness (Stinchcombe, 1965),

and outsidership (Johanson & Vahlne, 2009). We find that ISBHs are confronted with

a related, yet distinct added liability when trying to attract international clients that we

call liability of embeddedness (LOE). Whereas the recent concept of liability of

outsidership emphasizes the costs of not being included in critical business networks

when entering foreign markets, LOE captures the idea that social enterprises are

typically strongly embedded in certain social and community contexts within which

their social mission is highly valued. Trying to tap into client markets outside this

context creates a ‘liability’ because business clients that are not part of this context

may not value the social mission, and benchmark the value proposition of ISBHs

against regular businesses. While geographic distance does not necessarily generate

this liability, since some international clients may sympathize with the social mission,

geographic distance (including cultural and institutional distance) seems likely to

increase this liability. Thus, on top of ‘liability of newness’ coming from pursuing a

199

new, hybrid business model, social enterprises potentially suffer from LOE due to

their social mission.

Related to this, our study underscores the importance of concepts from

international business theory in helping understand the specific challenges ISBHs face

compared to social enterprises that solely operate in domestic contexts. For example,

our notion of LOE is closely related to the concepts of cultural and institutional

distance (Kostova, 1999; Xu and Shenkar, 2002) in the sense that this liability

increases the more distant business clients are from the cultural and institutional

context hybrids operate in. Another interesting parallel concerns the way hybrids

manage this liability. Research on institutional distance suggests that one way for

firms to mitigate that distance is to outsource operations to local suppliers who are

much more familiar with certain institutional contexts (Xu and Shenkar, 2002;

Manning et al. 2018). In turn, we find that hybrids often ‘outsource’ their social

mission and related community work to specialized community organizations as a

way to decouple business from social operations and to mitigate LOE towards clients.

Further research is needed to better understand how hybrids manage this liability, and

how in turn their clients and stakeholders affect it as well.

In addition, we encourage future studies to test and extend the applicability of

other established international business theories and concepts to our understanding of

hybrids in international contexts. For example, as more and more hybrids not only

target international clients but actually expand across national borders, the logic of

location and governance choice becomes eminent. To what extent can mainstream

international business theories, such as the eclectic paradigm (Dunning, 1988),

internalization theory (Buckley and Casson 1976), and industrial organization theory

200

(Caves 1971), explain how hybrids go about internationalization? Anecdotal evidence

suggests that hybrids choose to disintegrate much of their social mission work to local

community organizations when expanding across borders. The case of Samasource is

a good example (Gino and Staats, 2012; Lacity et al., 2012). Does that suggest that

potential advantages of internalization are relatively low, maybe because each local

context with its specific social needs is too idiosyncratic? Is working with multiple

geographically dispersed community organizations a better way to mitigate LOE than

trying to get ‘embedded’ in various local communities and environments?

This study also has some important limitations which need to be overcome in

future research. First, we did not measure an important component of the social

hybrid business model, its revenue generation model and the social value created.

Future research might address how these are affected as a result of pursuing for

example an integrated or decoupled strategy in an international context. Second,

future research needs to examine to what extent our findings apply to other global

industry contexts, such as outsourcing in manufacturing or global food commodities.

For example, in some industries, the option to serve domestic rather than international

clients may not exist. Conversely, in contexts where business clients are beneficiaries

at the same time, LOE may be a much more severe growth constraint and strategies of

managing LOE may also be very different. Third, more longitudinal data is needed to

better understand how and to what extent social entrepreneurs may transition from

one configuration to another. For example, how can entrepreneurs switch from

integrated to decoupled, or from low-skilled to high-skilled models?

In conclusion, this study shows how business models of social business

hybrids may vary in international contexts. Particularly we showed how domestic

201

mainstream competition, the founders international background and client

expectations matter in how social enterprises configure themselves in international

contexts. In response to Zahra et al. (2008, 2013), this study contributes to a more

contextual understanding of implementing social business hybrids internationally. Our

findings also have important implications for policy-makers trying to promote social

enterprises in business-to-business sectors, and for social entrepreneurs trying to

compete with mainstream competitors.

202

References

Abbott P. (2013). How can African countries advance their outsourcing industries: An

overview of possible approaches. The African Journal of Information Systems,

5(1), 27-35.

Adler, P. S., & Kwon, S. W. (2002). Social capital: Prospects for a new

concept. Academy of Management Review, 27(1), 17-40.

Aharoni, Y. (1966). The foreign investment decision process. Boston.

Arora, A., & Athreye, S. (2002). The software industry and India’s economic

development. Information Economics and Policy, 14(2), 253-273.

Athreye, S. S. (2005). The Indian software industry and its evolving service

capability. Industrial and Corporate Change, 14(3), 393-418.



Journal, 53(6), 1419-1440.


from the study of social enterprises. Academy of Management Annals, 8(1),

397-441.

Battilana, J., Lee, M., Walker, J., & Dorsey, C. (2012). In search of the hybrid

ideal. Stanford Social Innovation Review, 10(3), 50-55.



enterprises. Academy of Management Journal, 58(6), 1658-1685.

Bocken, N.M.P., S.W. Short, P. Rana and S. Evans. 2014. A literature and practice

review to develop sustainable business model archetypes, Journal of Cleaner

Production, 65, 42-56.


‘new economy’outcomes: cluster formation in the new Silicon

Valleys. Industrial and Corporate Change, 10(4), 835-860.

Brock, D. D., & Kim, M. (2011). Social entrepreneurship education resource

handbook.

Buckley, P, J. & Casson, M. (1976) The Future of the Multinational Enterprise, New

York: Saint Martin Press.

Carroll, A. B. (1999). Corporate social responsibility: Evolution of a definitional

construct. Business & Society, 38(3), 268-295.

Carroll G. R. (1983) A stochastic model of organizational mortality: review and

reanalysis, Social Science Research, Vol.12, pp.303-329.

Caves, R.E. (1971) International corporations: the industrial economics of foreign

investment, Economica, 38, 1-27.

203

Chen, S. (2012). Creating sustainable international social ventures. Thunderbird

International Business Review, 54(1), 131-142.

Chesbrough, H., & Rosenbloom, R. S. (2002). The role of the business model in

capturing value from innovation: evidence from Xerox Corporation's

technology spin‐off companies. Industrial and Corporate Change, 11(3), 529-

555.

Dahan, N. M., Doh, J. P., Oetzel, J., & Yaziji, M. (2010). Corporate-NGO

collaboration: Co-creating new business models for developing markets. Long

Range Planning, 43(2), 326-342.

Dai, O., & Liu, X. (2009). Returnee entrepreneurs and firm performance in Chinese

high-technology industries. International Business Review, 18(4), 373-386.


Business Review, 83(6), 100-108.

Desa, G. (2012). Resource mobilization in international social entrepreneurship:

Bricolage as a mechanism of institutional transformation. Entrepreneurship

Theory and Practice, 36(4), 727-751.

Desa, G., & Kotha, S. (2006). Ownership, mission and environment: an exploratory

analysis into the evolution of a technology social venture. In Social

entrepreneurship (pp. 155-179). Palgrave Macmillan UK.

Diesing, P. (1979). Patterns of discovery in the social sciences. New Brunswick:

Transaction Publishers.

Doh, J. P. (2005). Offshore outsourcing: Implications for international business and

strategic management theory and practice. Journal of Management Studies,

42(3), 695-704.

Doherty, B., Haugh, H., & Lyon, F. (2014). Social enterprises as hybrid

organizations: A review and research agenda. International Journal of

Management Reviews, 16(4), 417-436.

Dossani, R., & Kenney, M. (2007). The next wave of globalization: relocating service

provision to India. World Development, 35(5), 772-791.

Dunning, J. H. (1988). The eclectic paradigm of international production: A

restatement and some possible extensions. Journal of International Business

Studies, 19(1), 1-31.


Opportunities and challenges. Academy of Management Journal, 50(1), 25–32.

Emerson, J. (2003). The blended value proposition: Integrating social and financial

returns. California Management Review, 45(4), 35-51.

Ethiraj, S. K., Kale, P., Krishnan, M. S., & Singh, J. V. (2005). Where do capabilities

come from and how do they matter? A study in the software services

industry. Strategic Management Journal, 26(1), 25-45.

204

Freeman, J., Carroll, G. R., & Hannan, M. T. (1983). The liability of newness: Age

dependence in organizational death rates. American Sociological Review, 692-

710.

Gereffi, G., Humphrey, J., & Sturgeon, T. (2005). The governance of global value

chains. Review of International Political Economy, 12(1), 78-104.

Gillespie, K., Riddle, L., Sayre, E., & Sturges, D. (1999). Diaspora interest in

homeland investment. Journal of International Business Studies, 30(3), 623-

634.

Gillespie, K., Sayre, E., & Riddle, L. (2001). Palestinian interest in homeland

investment. The Middle East Journal, 237-255.

Gino, F., & Staats, B. R. (2012). The microwork solution. Harvard Business

Review, 90(12), 92.

Glückler, J., & Panitz, R. (2016). Relational upgrading in global value

networks. Journal of Economic Geography, 16(6), 1161-1185.

Graham, B. A. (2014). Diaspora-owned firms and social responsibility. Review of

International Political Economy, 21(2), 432-466.

Graham, B. A. (2012). Doing Business in the Homeland: Diaspora-Owned Firms and

the Value of Social Networks. Available at SSRN:

https://ssrn.com/abstract=1983575


strategies, impacts, and implications. California Management Review, 57(3),

5-12.

Hockerts, K. (2015). How hybrid organizations turn antagonistic assets into

complementarities. California Management Review, 57(3), 83-106.

Hoffman, A. J., Badiane, K. K., & Haigh, N. (2010). Hybrid organizations as agents

of positive social change: Bridging the for-profit & non-profit divide. Golden-

Biddle, K. and Jane Dutton, J. (eds). Using a Positive Lens to Explore Social

Change and Organizations: Building a Theoretical and Research Foundation

(New York: Routledge, Taylor and Francis Group): 131-153.; Ross School of

Business Paper No. 1149.

Holt, D., & Littlewood, D. (2015). Identifying, mapping, and monitoring the impact

of hybrid firms. California Management Review, 57(3), 107-125.


upgrading in industrial clusters?. Regional Studies, 36(9), 1017-1027.

Jaffe, A. B., & Trajtenberg, M. (1999). International knowledge flows: evidence from

patent citations. Economics of Innovation and New Technology, 8(1-2), 105-

136.


hybrid organizations. Academy of Management Journal, 56(1), 137-159.

https://ssrn.com/abstract=1983575

205

Johanson, J., & Vahlne, J. E. (2009). The Uppsala internationalization process model

revisited: From liability of foreignness to liability of outsidership. Journal of


Kannothra, C. G., Manning, S., & Haigh, N. (2017). How hybrids manage growth and

social–business tensions in global supply chains: The case of impact

sourcing. Journal of Business Ethics, 1-20.

Kenney, M., Breznitz, D., & Murphree, M. (2013). Coming back home after the sun

rises: Returnee entrepreneurs and growth of high tech industries. Research

Policy, 42(2), 391-407.

Kenney, M., Massini, S., & Murtha, T. P. (2009). Offshoring Administrative and

Technical Work: New Fields for Understanding the Global Enterprise. Journal

of International Business Studies, 887-900.

Kerlin, J. A. (2013). Defining social enterprise across different contexts: A conceptual

framework based on institutional factors. Nonprofit and Voluntary Sector

Quarterly, 42(1), 84-108.

Kerr, W. R. (2008). Ethnic scientific communities and international technology

diffusion. The Review of Economics and Statistics, 90(3), 518-537.

Kickul, J., & Lyons, T. S. (2016). Understanding social entrepreneurship: The

relentless pursuit of mission in an ever changing world. Routledge. 22-23.

Kolk, A. (2016). The social responsibility of international business: From ethics and

the environment to CSR and sustainable development. Journal of World

Business, 51(1), 23-34.

Kolk, A., & Pinkse, J. (2008). A perspective on multinational enterprises and climate

change: Learning from “an inconvenient truth”?. Journal of International


Kostova, T. (1999). Transnational transfer of strategic organizational practices: A

contextual perspective. Academy of Management Review, 24(2), 308-324.


sourcing and impact sourcing. IEEE Readynotes, IEEE Computer Society.


individuals and hybrid social ventures. Harvard Business School

Organizational Behavior Unit Working Paper No. 14-005. Available at SSRN:

https://ssrn.com/abstract=2291686 or http://dx.doi.org/10.2139/ssrn.2291686

Lee, M. (2014). Mission and markets? The viability of hybrid social ventures.

Academy of Management Proceedings, 2014(1), p. 13958.

Levy, D. L., & Kolk, A. (2002). Strategic responses to global climate change:

Conflicting pressures on multinationals in the oil industry. Business and

Politics, 4(3), 275-300.


innovation? The emerging global race for talent. Journal of International


206

Mair, J. (2006). Introduction to part II—Exploring the intentions and opportunities

behind social entrepreneurship. In Social Entrepreneurship (pp. 89-94).

Palgrave Macmillan UK.

Mair, J., & Marti, I. (2006). Social entrepreneurship research: A source of

explanation, prediction, and delight. Journal of World Business, 41(1), 36-44.

Mair, J., Martí, I., & Ventresca, M. J. (2012). Building inclusive markets in rural

Bangladesh: How intermediaries work institutional voids. Academy of


Mair, J., Mayer, J., & Lutz, E. (2015). Navigating institutional plurality:

Organizational governance in hybrid organizations. Organization

Studies, 36(6), 713-739.

Mair, J., & Noboa, E. (2006). Social entrepreneurship: How intentions to create a

social venture are formed. In Social Entrepreneurship (pp. 121-135). Palgrave

Macmillan UK.


knowledge work and the rise of knowledge services clusters. Research Policy,

42(2), 379-390.

Manning, S., Kannothra, C.G., Wissman-Weber, N. (2017). “The strategic potential of

community-based hybrid models: The case of global business services in

Africa”. Global Strategy Journal, 7, 125-149.

Manning, S., Massini, S., Lewin, A.Y. (2008). A dynamic perspective on next-

generation offshoring: The global sourcing of science and engineering

talent. The Academy of Management Perspectives, 22(3), 35-54.

Manning, S., Massini, S., Peeters, C., Lewin, A.Y. (2018). “The Changing Rationale

for Governance Choices: Early vs. Late Adopters of Global Services

Sourcing”. Strategic Management Journal (forthcoming).

Maxwell, J. A. (2012). Qualitative research design: An interactive approach (Vol.

41). Sage publications.

Meyer, K.E. (2018). Catch-up or leapfrogging: Emerging economy multinational

enterprises on the global stage. International Journal of the Economics of

Business. Forthcoming.

Mintzberg, H. (1983). The case for corporate social responsibility. Journal of

Business Strategy, 4(2), 3-15.


industries. Journal of Economic Geography, 8(5), 699-725.

Nanda, R., & Khanna, T. (2010). Diasporas and domestic entrepreneurs: Evidence

from the Indian software industry. Journal of Economics & Management

Strategy, 19(4), 991-1012.

Nicholls, A. (2011). Editorial: Social Enterprise–At the Forefront of Rethinking

Business?. Journal of Social Entrepreneurship, 2(1), 1-5.

207

Nkongolo-Bakenda, J. M., & Chrysostome, E. V. (2013). Engaging diasporas as

international entrepreneurs in developing countries: In search of

determinants. Journal of International Entrepreneurship, 11(1), 30-64.



Journal, 56(4), 972-1001.



Development, 30(9), 1561-1577.

Perrini, F., & Vurro, C. (2006). Social entrepreneurship: Innovation and social change

across theory and practice. In Social Entrepreneurship (pp. 57-85). Palgrave

Macmillan UK.

Porter, M. E., & Kramer, M. R. (2011). Creating shared value: Redefining capitalism

and the role of the corporation in society. Harvard Business Review, 89(1/2),

62-77.

Porter, M. E. (1990). The competitive advantage of nations. Harvard Business

Review, March-April, 73-91.

Prahalad, C. K. (2006). The Fortune at the Bottom of the Pyramid. Pearson Education

India.

Pruthi, S. (2014). Social ties and venture creation by returnee

entrepreneurs. International Business Review, 23(6), 1139-1152.



Development, 25(11), 1821-1837.

Riddle, L., Hrivnak, G. A., & Nielsen, T. M. (2010). Transnational diaspora

entrepreneurship in emerging markets: Bridging institutional divides. Journal

of International Management, 16(4), 398-411.

Robinson, J. (2006). Navigating social and institutional barriers to markets: How

social entrepreneurs identify and evaluate opportunities. In Social

Entrepreneurship (pp. 95-120). Palgrave Macmillan UK.

Rallis, S. F., & Rossman, G. B. (1998). Learning in the field: An introduction to

qualitative research. Learning in the field: an introduction to qualitative

research.

Rockefeller Foundation (2013). Dahlberg Report- Digital Jobs in Africa: Catalyzing



inclusive-opportunities-for-youth/ (accessed on 30 January, 2018).





208

Saxenian, A. (2005). From brain drain to brain circulation: Transnational

communities and regional upgrading in India and China. Studies in

Comparative International Development (SCID), 40(2), 35-61.

Saxenian, A. (2002). Silicon Valley’s new immigrant high-growth

entrepreneurs. Economic Development Quarterly, 16(1), 20-31.

Saxenian, A., & Hsu, J. Y. (2001). The Silicon Valley–Hsinchu connection: technical

communities and industrial upgrading. Industrial and Corporate

Change, 10(4), 893-920.

Seelos, C., & Mair, J. (2005). Social entrepreneurship: Creating new business models

to serve the poor. Business Horizons, 48(3), 241-246.

Singh, J. V., Tucker, D. J., & House, R. J. (1986). Organizational legitimacy and the

liability of newness. Administrative Science Quarterly, 171-193.

Smith, W. K., Besharov, M. L., Wessels, A. K., & Chertok, M. (2012). A paradoxical

leadership model for social entrepreneurs: Challenges, leadership skills, and

pedagogical tools for managing social and commercial demands. Academy of

Management Learning & Education, 11(3), 463-478.

Smith, W. K., Binns, A., & Tushman, M. L. (2010). Complex business models:

Managing strategic paradoxes simultaneously. Long Range Planning, 43(2),

448-461.



Quarterly, 23(3), 407-442.

Stinchcombe, A. L. (1965). Organizations and social structure. Handbook of

Organizations, 44(2), 142-193.

Thompson, J. D., & MacMillan, I. C. (2010). Business models: Creating new markets

and societal wealth. Long Range Planning, 43(2), 291-307.

Upadhya, C. (2007). Employment, exclusion and 'merit' in the Indian IT industry.

Economic and Political Weekly, 1863-1868.

Wang, D. (2015). Activating cross-border brokerage: Inter organizational knowledge

transfer through skilled return migration. Administrative Science

Quarterly, 60(1), 133-176.

Whitley, R. (Ed.). (1992). European business systems: Firms and markets in their

national contexts. Sage.

Xu, D., & Shenkar, O. (2002). Note: Institutional distance and the multinational

enterprise. Academy of Management Review, 27(4), 608-618.

Yin, R. K. (2008). Case study research: Design and methods. Sage publications.


models: Lessons from the Grameen experience. Long Range Planning, 43(2),

308-325.

209

Zaheer, S. (1995). Overcoming the liability of foreignness. Academy of Management

Journal, 38(2), 341-363.

Zaheer, S., Lamin, A., & Subramani, M. (2009). Cluster capabilities or ethnic ties?

Location choice by foreign and domestic entrants in the services offshoring

industry in India. Journal of International Business Studies, 40(6), 944-968.

Zahra, S. A., Ireland, R. D., & Hitt, M. A. (2000). International expansion by new

venture firms: International diversity, mode of market entry, technological

learning, and performance. Academy of Management journal, 43(5), 925-950.

Zahra, S. A., Newey, L. R., & Li, Y. (2014). On the frontiers: The implications of

social entrepreneurship for international entrepreneurship. Entrepreneurship

Theory and Practice, 38(1), 137-158.

Zahra, S. A., Rawhouser, H. N., Bhawe, N., Neubaum, D. O., & Hayton, J. C. (2008).

Globalization of social entrepreneurship opportunities. Strategic

Entrepreneurship Journal, 2(2), 117-131.

Zott, C., Amit, R., & Massa, L. (2011). The business model: recent developments and

future research. Journal of Management, 37(4), 1019-1042.

210

CHAPTER 5

CONCLUSION

Main Findings

Guided by the overall research question, “what are the core strategies and

contingencies of managing social-business hybrids (SBHs) in global contexts?”, this

thesis investigates social-business hybrids in an international context. Investigating

how hybrids approach growth and manage social–business tensions, this thesis argues

that rather than dealing with ‘‘mission drift’’ as a potential consequence of growth,

hybrids develop ‘‘growth orientations'' that incorporate certain ways of managing

social–business tensions. Choosing a certain growth orientation influences which

social–business tensions become manifest and either ‘‘accepted'' or subject to certain

managerial solutions. Therefore, tensions manifest themselves in context-specific

ways. This thesis also argues that SBHs with an international orientation vary in their

business model configurations depending on the conditions under which they operate-

they tend to implement certain combinations of characteristics and that each

configuration can be equally valuable depending on the conditions under which SBHs

operate. Further, this thesis also argues that SBH models can be a strategic opportunity

for firms operating in latecomer economies compared to regular

211

business models, as the former can utilize certain local resource conditions more

effectively.

This thesis consists of three research papers based on field research on impact

sourcing service providers (ISSPs) from four different country contexts, namely-

Kenya, India, South Africa and the USA. ISSPs present the opportunity to study SBH

models embedded in the global supply chain of business process outsourcing (BPO).

ISSPs, like any other hybrid organizations, navigate paradoxical social business

tensions- on the one hand, they strive to meet the commercial expectations of profit

generation, professionalism, and growth; on the other hand, they also endeavor to create

social value for the local communities they are embedded in. ISSPs present complex

and dynamic social business models which are investigated as a part of this study.

The first paper (Chapter 2) investigates how social business hybrids navigate

paradoxical tensions in the context of growth based on the research question: “how do

hybrids in global supply chains balance growth opportunities and social–business

tensions?" Two major growth orientations of social business hybrids are identified-

‘‘community-focused'' and ‘‘client-focused'' growth—their inherent tensions and ways

that hybrids manage them. The former favors slow growth and manages tensions

through highly integrated client and community relations; the latter promotes faster

growth and manages client and community relations separately. Both growth

orientations address social–business tensions in particular ways, but also create latent

constraints that manifest when entrepreneurial aspirations conflict with the current

growth path. Findings indicate that neither slower-paced community-focused growth

nor faster-paced client-focused growth is tension-free. Rather, each orientation is

associated with different ways that tensions are perceived and managed, and therefore,

212

managing (and perceiving) tensions happen in a certain strategic frame. Findings thus

stress the importance of not only analyzing individual awareness (Jay, 2013), and

alignment between individual and organizational goals (Hahn et al., 2015), but also

alignment between entrepreneurial or managerial aspirations and current structural

conditions in understanding the management of paradoxes.

The second paper investigates the strategic potential of community based social

business hybrid models for latecomer economies (in this case, for Sub-Saharan Africa)

and their advantages over regular business models for the ‘catch up’ processes in

emerging economies (Altenburg et al., 2013; Lorenzen and Mudambi, 2013) based on

the research question: “under what conditions is the adoption of hybrid models a

feasible strategic opportunity for firms that operate in Sub-Saharan Africa and serve

regional and global clients?". Findings from this study indicate the utility of

community-based social hybrid business models as an alternative to more scale

dependent, low-cost production of mainstream industry models. SBHs utilize local

communities as resources (e.g., utilize their knowledge of local regulations, take

advantage of local funding sources, recruit local resources, etc.) and serve niche

markets (local as well as international) rather than scale-dependent mainstream

markets. Using an extended version of the tripod model for strategic analysis (Peng et

al., 2008, 2009), this paper argues that the success of such SBH models require certain

industry conditions as well as institutional and firm-level openness to using community

resources and serving niche markets. For example, certain industry conditions may

lower the need to scale up hybrid organizations to make them competitive and instead

allow a heterogeneous population of smaller scale hybrids to emerge. We find this true

in the case of impact sourcing service providers emerging out of sub-Saharan Africa.

213

The third paper is motivated by the research question: “how do founders’


international social-business hybrids?” Findings that emerged from this study indicate

four business model configurations that seem equally prevalent yet differ in strategic

focus and internal organization: strategically, ISSPs either serve international and

domestic clients, or exclusively domestic clients, and they either prioritize the social

mission or business opportunities. Organizationally, ISSPs either focus on low-cost

(lower-skilled) or differentiated (higher-skilled) services, and they either integrate or

decouple social mission and business operations. This study elaborates what is driving

the emergence of each configuration, specifically in terms of the role of founders’

background and intensity of domestic competition for client projects, and how each

strategic choice translates into certain implementations. This study introduces the

notion of Liability of Embeddedness (LOE). LOE captures the idea that social

enterprises are typically strongly embedded in certain social and community contexts

within which their social mission is highly valued. Business clients that are not part of

this context may not value the social mission, and benchmark the value proposition of

ISBHs against regular businesses

Findings indicate that the level of international professional experience of the

entrepreneurs affects whether founders are social mission-driven or business

opportunity-driven in starting an ISSP, which, in turn, affects how much they invest

into training and developing beneficiary staff, resulting in either focusing on lower cost/

low skilled services or differentiated/high skilled services. This study finds that the

level of domestic mainstream competition for international client projects and related

client expectations affect an ISSP’s choice of target client markets. High level of

214

competition would typically prompt ISSPs to focus on domestic clients, which helps

ISSPs avoid the challenge of liability of smallness, newness and embeddedness when

facing international clients. When competition is lower, ISSPs are more likely to target

international clients. However, most ISSPs targeting international clients would

decouple business operations and social missions to be more flexible and scalable,

while also mitigating continuous LOE. Findings may inform research on globalizing

social enterprises (Zahra et al., 2008, 2014); it also informs the research on social

business models (Yunus et al., 2010) and specifically explains variations in social

business models.

Implications for future research

The findings presented in this thesis contain some important theoretical implications

for future research. Specifically, this thesis contributes to the literature by highlighting

the globalizing nature of social business hybrid organizations (Zahra et al., 2008, 2014).

All three studies of this thesis provide a more contextual understanding of hybrid

organizing, broad strategies and business models adopted by SBH in an international

context and the adoption of such business models considering the industry, institutional

and firm-level factors.

First, this thesis contributes to a more contextual understanding of how

paradoxical tensions are perceived and managed in social business hybrid organizations

(Battilana and Lee 2014; Smith et al. 2013). This study identifies growth as a major

driver for how paradoxical tensions are perceived and managed. Prior studies suggest

that for SBHs, growth may result in "mission drift" or increased tension between the

commercial and social forms of a hybrid organization (Andre and Pache, 2016; Clifford

et al., 2013). Findings related to the two major growth orientations of SBHs (i.e.,

215

slower-paced, community-focused growth and faster-paced, client-focused growth) are

associated with different ways that tensions are perceived and managed by SBHs.

Community-focused growth aligns with community centered ways of managing social-

business tensions. This does not eradicate the latent social-business tensions completely

(Smith and Lewis, 2011). But it lowers the perceived tensions within that strategic

frame. For example, differentiated core organizational activities to advance commercial

and social mission (e.g., "decoupling" in Pache and Santos (2013)) may be considered

as a feasible practice in a more client-focused frame, while it may add to the

organizational tension in a community-focused frame. Future research should thus pay

more attention to context-specific organizational paradoxes and tensions.

Second, this study draws attention to the business models of social business

hybrids. The concept of the social business model (Yunus et al., 2010) and the business

model lens to study social enterprises is gaining prominence due to the increasing focus

on self-sustaining their operations. This thesis recognizes that social enterprises may

vary in their business model configurations (e.g., Santos et al., 2015) and identifies four

different categories based. This study suggests that SBHs tend to implement certain

combinations of characteristics (in this case, based on founders' prior experience and

intensity of domestic competition); each configuration can be equally valuable

depending on the conditions under which SBHs operate. Future studies may evaluate

the social business models in its entirety, including the social/profit equation. One of

the questions to consider for future research may be -do certain strategic focus result in

better social value creation (e.g., Developmental model) compared to others (e.g.,

Opportunistic model)?

216

Third, this thesis looked at one of the important resources available to SBHs-

community linkages. Future research to carefully study organizational structures,

governance modes and operational challenges of ‘community-based hybrids,' which

seems to be particularly important in emerging economies. In addition to institutional

conditions and entrepreneurial antecedents, local and global industry conditions are

also important to understand the adoption of hybrid business models.

Fourth, this study also recognizes the increasing importance of “social

responsibility” and “inclusive employment” as a managerial concern in the global

business-to-business sectors, especially in global outsourcing. Outsourcing clients and

providers are working toward social and environmental sustainability in their

relationships and operations (Babin and Nicholson, 2010; IAOP, 2012) and this may

also be influenced by legislations that institutionalize social missions in several sectors

(Haigh et al., 2015). Future research may pay attention to the adoption of such practices,

especially in the context of a “buyer-driven” industry like outsourcing.

217

References



Andre´, K., & Pache, A. C. (2016). From caring entrepreneur to caring enterprise:

Addressing the ethical challenges of scaling up social enterprises. Journal of Business

Ethics, 133(4), 659–675.

Babin, R., & Nicholson, B. (2009). Corporate social and environmental responsibility

in global IT outsourcing. MIS Quarterly Executive, 8(4), 123-132.


from the study of social enterprises. Academy of Management Annals, 8(1), 397-441.

Clifford, J., Markey, K., & Malpani, N. (2013). Measuring social impact in social

enterprise: The state of thought and practice in the UK. London: E3M.

IAOP. (2012). Does corporate social responsibility matter? International Association

of Outsourcing Professionals. Retrieved from IAOP:

https://www.iaop.org/content/23/126/1698.

Jay, J. (2013). Navigating paradox as a mechanism of change and innovation in hybrid

organizations. Academy of Management Journal, 56(1), 137-159.

Hahn, T., Pinkse, J., Preuss, L., & Figge, F. (2015). Tensions in corporate sustainability:

Towards an integrative framework. Journal of Business Ethics, 127(2), 297–316.


strategies, impacts, and implications. California Management Review, 57(3), 5-12.

Lorenzen, M., & Mudambi, R. (2012). Clusters, connectivity and catch-up: Bollywood

and Bangalore in the global economy. Journal of Economic Geography, 13(3), 501-

534.



Journal, 56(4), 972-1001.

Peng M, Wang DYL, Jiang Y. 2008. An Institution-Based View of International

Business Strategy: A Focus on Emerging Economies. Journal of International Business

Studies 39 (5): 920-936.

Peng M, Sun SL, Pinkham B, Chen B. 2009. The Institution-Based View as a Third

Leg for a Strategy Tripod. Academy of Management Perspectives 23 (3): 63-81.

218





Quarterly, 23(3), 407-442.


equilibrium model of organizing. Academy of Management Review, 36(2), 381–403.


models: Lessons from the Grameen experience. Long range planning, 43(2), 308-325.

Zahra, S. A., Newey, L. R., & Li, Y. (2014). On the frontiers: The implications of social

entrepreneurship for international entrepreneurship. Entrepreneurship Theory and

Practice, 38(1), 137-158.

Zahra, S. A., Rawhouser, H. N., Bhawe, N., Neubaum, D. O., & Hayton, J. C. (2008).

Globalization of social entrepreneurship opportunities. Strategic entrepreneurship

journal, 2(2), 117-131.

219

APPENDIX A: IRB APPROVAL LETTER

221

APPENDIX B: EXAMPLE INTERVIEW PROTOCOL

Interview Protocol

The following interview protocol will be used as a guideline to plan and conduct

interviews with entrepreneurs; the protocol for taking field notes is given at the end of

this document.

Before the interview

1. Preparation for the interview:

Go through the online portal of NASSCOM Foundation

(https://is.nasscomfoundation.org/issps/explore) or Rockefeller Foundation

website (http://www.rockefellerfoundation.org/our-work/initiatives/digital-

jobs-africa/) or Impact Hub (http://impacthub.org/players/service-

providers/) to get an overview about the ISSP (if listed in any of these

websites), and latest developments in the field.

Go through the web site of the ISSP (if operational) to see if the social

mission of the organization, demographic profile of the employees

(disadvantaged background) etc. are mentioned.

A brief questionnaire should be mailed to the interviewee at least a day

before the interview. Ask permission for audio recording of the proposed

interview along with this mail.

Mention that the interview data will not be shared with a third party; also,

the interview data will not be used for any commercial purpose.

222

Carry two copies of the interview protocol/questions, business

cards/identification documents before reaching the interview venue.

Make sure the founder/entrepreneur will be present for the interview. In

unavoidable circumstances, an executive who knows about the operation

of the organization may suffice.

2. As I meet the person to interview

General introduction at the start of all interviews; greetings/salutations and

exchanging basic information, business cards etc.

Brief description about myself, professional background, research interests (1

or 2 sentences)

Brief description about aims and objectives to be achieved from this interview.

For example, -what I am interested in knowing from them, what is basically

driving this trend of Impact Sourcing, why do ISSPs, clients etc. adopt this,

how to make sense of this phenomenon, what is happening on ground and is

impact sourcing or smart sourcing as you call it here to stay?

Mention briefly what I found interesting about that organization at the

beginning itself: For e.g., in the case of iMerit- “What is interesting about your

organization is that you have a center now in NY which is very unique for a

company set up in India. We heard your name mentioned during our interview

with the NASSCOM Foundation as well.

Remind that the interview will be recorded; mention the name of the person

interviewed as well as my name at the beginning of recording.

Take notes while recording.

223

3. Interview Questions

A. Entrepreneur’s Background

Can you say a few words about yourself and how you got associated with the

company; What's your engagement here? What is your professional

background?

Questions based on professional background related to diaspora network

(Summer 2015)

o Which country and how long have you worked/stayed?

o What made you relocate to this country?

o Which institution did you join there? What program? Location?

o Where did you work after completing your course? What industry/

technology/profession?

o Tell me about your interaction with your home location at this point of

time? Did you ever consider going back after graduating? Why or Why

not? Did you consider investing/ launching a start up at this point of

time in either the host or home country then?

o Tell me about your professional networks at this point of time? Were

you a part of any industry association? Elaborate how you networked

with other professional then and over a period of time?

o How did you hear about Impact Sourcing? Have you had any

interaction with Rockefeller Foundation/NASSCOM Foundation etc.?

o What motivated you to start this venture? Why this particular location?

Did you know anyone specifically here professionally or personally?

o Did you receive any institutional support when you decided to launch

224

your company?

o Were you aware of any government support in home country?

o Were you aware of any host country initiatives/investment promotion/

bilateral agreements/investment instruments?

o How satisfied were you with your professional life before launching

this company? What prospects of growth did you have in the host

country?

o What were the concerns that you had about the home country location?

Are they still valid?

o Did your perception of home country change between the time you

were there and you reached here?

o What was your main source of information about the home country

business environment?

o How was the reaction from your immediate family? Where were they

located then? Where are they located now?

o What was your alternative/ Plan B, other than launching this company?

o How did you get your first client? Subsequent clients? Do you have a

marketing office back in the host country?

o How do you reach out to people from your old network?

o Do you know of others similar to you who have launched ventures in

home country?

o Do you feel that you have an advantage over the local

entrepreneurs/competitors? If so, how? For example, in the interactions

with your local government.

225

o How do you engage with the local community?

Professionally/personally?

o [More questions to be added based on literature review]

B. Organizational profile, environment

Can you tell me a little bit about the inception of the organization?

o Background of other co-founders? How did you come together to start

the company?

o What motivated you to become a social entrepreneur? What motivated

you towards impact sourcing? How much were you aware of impact

sourcing before?

o Who were the partners initially? Funding partners/foundation support?

o Elaborate on your business model- is it a for profit/not for profit

organization?

o Elaborate on your main services? [Digital Publishing, Data

Management, Global Service Desks/Custom Services?

o Elaborate on the nature of services, complexity and skill level of

employees- client facing roles, turn-around time, etc.

o What percentage of your service portfolio is related to impact

sourcing? How do you envisage this to remain in future?

Decrease/increase?

o Growth plans/ other locations?

C. Social Mission

Tell me more about your social mission? What kind of social impact do you

envisage? How do you define disadvantaged?

226

o How do you hire people? How do you identify resources? What are the

challenges that you face while hiring?

o Tell me more about your employees- where do they come from? What

kind of skillsets do they possess? How do you convince them to work

for you? What are the challenges that you face because of the special

nature of the workforce (minority community, disabled etc.?).

o What kind of skills/educational levels these employees have when they

join? What kind of training program do you have for them? How do

you fund these trainings?

o How do you think your employees benefit from the opportunity?

o Tell me more about your linkages with community organizations.

o Tell me about your linkages with foundations, development

organizations and government departments; what kind of support do

you receive from any of these?

o Ask question related to their social mission (or lack of it) in their

website as an anchor to the next set of questions.

D. Commercial Operation

Elaborate on your engagement with clients.

o Who are your major clients/industries etc.?

o What kind of clients/profile of clients (international, mainstream

service providers etc., for profit or non-profit)

o What kind of client relationships have you explored till now? Direct,

sub- contracting,

o How do you deal with cyclical variation in business demands? How do

227

you engage your employees during this time?

o How much are your clients involved in your daily operation? How

much face to face interaction is involved? How far or near are your

clients located (approximate breakup).

o How do you tell clients of your social mission?

o What do they think of your social impact mission? Are they aware of

the social impact?

o What was their reaction when you first told them about the employees

you recruit? How did you convince the clients?

o What are the main criteria for them to say yes to you? What do you

think the clients are interested in? How much does your external

clients care about the social mission of your organization?

o What about the cost structure compared to mainstream Business

Process Outsourcing companies? How much do the clients expect you

to undercut your pricing compared to a mainstream BPO?

o Tell me about your competitors. What kind of competitors exists in the

rural sourcing arena? What kind of business model do they follow, in

your opinion?

E. General Questions/ Hybrid Sustainability

What is your future plan/s for the organization?

o How probable is that you remain in this field/remain as a social

entrepreneur?

o How do you see an opportunity to become a mainstream service

provider in the future?

228

What do you think is the future for impact sourcing?

What are the (3) major challenges that you face as an entrepreneur in this

field?

4. At the end of the interview:

Thank the participant for their participation

Go to a quiet place and write up some observational notes and journal

reflections about the interview (see protocol below); if this is not possible,

make sure the reflection is written down by the end of the day

Make back up copy of recording; upload recording, and observational and

journal notes to storage device.

Protocol for Observational Notes and Journal Reflections

Observational notes

o What was the location/setting of the interview?

o Is the participant same as the person who agreed for the interview/any

last-minute changes? This maybe important for final case selection.

o What was their manner? Are they ready to share details about their

social mission? Do questions about their social mission make them

uncomfortable?

Analytical thoughts about what you learned that is relevant to our research

questions:

o Any “aha” moments?

o Key takeaways from each interview?

o New understandings?

229

o New questions?

Ideas for research directions:

o Anyone that was mentioned that should be interviewed?

o Any new development in the field?

Self-reflection thoughts about role as a researcher:

o What did you learn about yourself?

o What did you do particularly well?

o What could you have done better?

o Any issues to work on?

230

BIOGRAPHICAL SKETCH OF AUTHOR

Chacko George Kannothra is a Lecturer (equivalent to tenure-track Assistant

Professor) in Strategy at the Department of Strategy and International Business at the

University of Birmingham, UK. His research is inter-disciplinary and explores the

core contingencies and strategies of managing social-business hybrids in global

contexts. His research interests include social entrepreneurship and hybrid

organizations, business models in emerging economies, and outsourcing with a focus

on emerging outsourcing destinations. His teaching interests include strategic

management and social entrepreneurship. Before joining the doctoral program at the

University of Massachusetts Boston, he worked as a Business Analyst for Accenture

and as a Consultant for the Ministry of Science and Technology, Government of

India. Outside of work, he likes indoor bouldering, exploring the English countryside,

and volunteering. He currently resides in Birmingham, UK.

Managing Social Business Hybrids in Global Contexts

Documents

Transcript of Managing Social Business Hybrids in Global Contexts